There Is No “Rule Of Thumb” in Real Estate Appraisal

I often get asked by homeowners how much their home should bring per square foot. This is not an easy question in today’s market. It’s impossible, with any accuracy, to throw out a figure because there are a lot of things that go into how much a home is worth. These include the size of the home (square footage), condition, age, quality of construction, location, and whether the home has had any renovations or home improvements.

An appraiser would be remiss in throwing out a dollar amount without doing the required research. With this being said, there is no rule of thumb in real estate appraisal. Each property is different and has to be looked at on a case by case basis.

As appraisers, we have to know the physical characteristics of the home as well as the other items just noted. We do not necessarily have to do an interior inspection, but we do have to have reliable information to base our estimates on.

After we collect data about the home we do research on what other similar homes have sold for in the neighborhood or a similar market area. We then collect information on the sales comparables, or “comps”, and make market derived adjustments for the price differences in the various features. Only after obtaining all of this information can we make educated estimates on what a home worth. A key factor in this process is that the appraiser knows the market area in which he does appraisal work. So the next time you ask an appraiser what your home is worth you may not get the answer you want.

Question

Do you have any questions or something else to add about a rule of thumb in appraising? Leave me a comment below and let’s keep the conversation going. As always, thanks for reading.

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Comments

  1. Tom, Your blog looks great! I am also asked all of the time about cost per square foot. I try to explain just what you have outlined in your blog post. I might add this question to my FAQ section of my real estate appraisal website.

    • Bryan,
      Thanks for the kind words. I thought this would be a good post since the question comes up so often. The more we can educate homeowners and clients the better.

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