REAL ESTATE TERMINOLOGY: APPRAISAL VS. ASSESSMENT VS. MARKET VALUE

In the vocabulary of real estate, there are three terms that indicate a home’s valuation: the Appraised Value, the Assessed Value and the Market Value. Rarely are these three values the same amount, so it is easy to confuse them when considering buying a home, obtaining a mortgage and contemplating ongoing costs of ownership. We’ll tackle them one at a time and then show you how they relate to each other.

Appraised Value

An appraisal is a valuation report completed by a licensed professional appraiser to determine property value at a given point usually for the purpose of obtaining a mortgage. It is an underwriting tool used by banks and other lenders to determine if the property is appropriate collateral for the loan they would be extending to a buyer for an original mortgage, or homeowner for the purpose of refinancing or obtaining a line of credit.

The appraiser uses recently sold comparable properties in the evaluation, accounting for differences in specific amenities such as square footage, the age of the roof, exterior and interior materials, the type and age of heating and cooling equipment, and a variety other factors to set a basis for the appraisal. The appraiser combines these numbers with other valuation methods such as the cost to rebuild the property (similar to the cost basis for homeowner insurance), or in the case of investment properties, the potential for income from rents or leases.

These numbers are not fixed. That is, there is no single list of values from which the appraiser draws. The appraisal relies on the appraiser’s own experience, understanding and knowledge of the area and property type. For the buyer, the appraisal that the mortgage lender uses is important because it determines how much money the lender is willing to extend to the borrower for the property. For an existing homeowner, an appraisal gives an indication of what a home will sell for, or the amount of a line or credit or second mortgage a bank will extend. During a home sale or refinance, the appraiser typically is the choice of the lender but paid for by the borrower. Having a proper appraisal is important to both the buyer and the seller since it determines the loan-to-value (LTV) ratio.

Assessed Value

An assessed value most often is performed by the taxing agency of a municipality—tax assessor—for the purpose of determining the tax basis of the property. The “assessment” is a percentage of the assessed value that the homeowner pays to the municipality as tax for capital improvements to roads, water and fire services, schools, and other essential services. Typically, the percentage amount of an assessment is the result of a vote on a levy.

Different from an appraisal where amounts are based on comparables, an assessment determines values for an entire neighborhood, city, or county during the evaluation period. The assessment is then an assigned number value to which the dollar amount may fluctuate as the municipality has need of more or less income. Therefore, while the actual tax rate may change from year to year, the assessment only changes when the values become outdated due to larger changes in the municipality’s structure, such as an increase in fire or 911 services, for example. Some cities or states only reassess homes when they are sold or transferred to new owners

Market Value

In real estate, market value is not the same as assessed or appraised value. For example, the price of popcorn at a movie theater might be $5.00 per bag, while that same amount of popcorn at a convenience store might be $2.00 and a similar bag at the grocery store would be just $.50. We are willing to pay each of these prices based on the location and convenience to ourselves at that place and time. In the same way, the market value of a home is the price for which a specific property will sell under a specific set of circumstances in its current condition at a specific time—typically 1 to 3 months.

There is no actual way to determine exact market value, given that if any of the circumstances change, the market value changes. The seller’s circumstances may change, the property circumstances may change (tornado, hurricane, imminent domain), the buyer circumstances may change (new business relocates to area), the community circumstances may change (school loses funding, commercial or industrial building built nearby) or any of a myriad of factors. So true market value is the price a house will sell for in the 30 to 90 day period. It is not what it will sell for in one week—that would be a price below true value—nor the price of the house if it hasn’t sold for 90 days—the price is higher than the market value.

How the Assessment, Appraisal and Market Values Relate

While each of these may be similar in amount to each other at a specific point, a property’s assessed may trail behind the appraisal and market values if the municipality has not upgraded the assessment in some time. Additionally, the appraisal must relate to comparables that the appraiser can prove to the lender, but cannot account for buyer-perceived value in a specific neighborhood, street or development. For example, if all of a buyer’s friends or family live in a two-block radius and a home becomes available in that neighborhood, the perceived value to that buyer may be higher than to another buyer. A motivated buyer may be willing to pay a higher price for a home than its appraised value, thereby adjusting the true market value.

7 Secret House Cleaning Tips From the Pros

Cleaning your house is a chore that takes you hours to complete. So you call a cleaning professional to do the task for you and BAM! They zoom right through the task. Ever wonder how? Us too. So we got the inside scoop — and some top-secret tricks — on their process.

Andrea Davis of the Huffington Post gives us 7 tips from the pros here!  7 Secret House Cleaning Tips From the Pros

Top 10 Preventive Maintenance Tips for Garage Door Owners

Your garage door is the largest moving part in your entire home, and is used multiple times per day at any hour and in all seasons. To keep your garage door operating smoothly for decades to come, it’s very important that you take the time to perform regular preventive care and maintenance. Here are 10 things that all homeowners can do:

1. Look and Listen

The most important preventive step you can take is to observe your garage door in action every time you use it. Is it moving smoothly or is it jerky in places? Does it operate silently or does it make grinding or scraping noises? Do both sides of the system (springs, pulleys and cables) look symmetrical?

2. Tighten up the Hardware

The average garage door moves up and down more than a thousand times a year. That’s a lot of movement and vibration, which can loosen the hardware. Examine and tighten all roller brackets and bolts with a socket wrench.

3. Test the Garage Door Balance

If your garage door is not properly balanced, the garage door opener will have to work harder, and it won’t last as long.

After you disconnect the opener by pulling the release handle (usually a red cord), manually move the door about halfway up. If it doesn’t stay put, the counterweight system (springs) are improperly balanced. Garage door spring adjustment is best left to the professionals.

4. Inspect and Replace the Rollers

The rollers, whether steel or nylon, need to be inspected twice a year and replaced every seven years or so, and even more if you use your garage door many times a day.

Worn, chipped or cracked rollers should be replaced as soon as possible. You do this by removing and reinstalling any roller brackets that are not directly attached to the cable system.

5. Replace the Weatherstripping

If the rubber weather seal strip on the bottom of your door is brittle or cracked, replace it right away to keep the elements out of your house. Weatherstripping is sold by the foot at hardware and home improvement stores. Just cut to size and insert into the grooves with the wide angle of the flange inside the door.

6. Lubricate the Moving Parts

Keeping your garage door parts greased up will add years of seamless operation to your system – and it takes just 10 minutes a year! Use white lithium grease on the opener’s chain or screw, and a spray lubricant, available from your garage door specialist, to coat the overhead springs.

7. Check the Cables

You should never tinker with the high-tension cables that lift your door because they have enough force to maim and kill. But you can check their condition so you know when to hire a pro. Check for broken strands and damage near the bottom roller bracket.

8. Test the Auto-Reverse Safety Features

There are two mechanisms: mechanical and photocell. In order to test the mechanical feature, place a piece of wood or a brick on the ground in the path of the door. When the door coming down touches that object, it should reverse direction and go back up again. To test the second, the photoelectric system with beams at each side, close your door and just pass your leg in the door’s path. Your door should reverse.

If your opener is more than 20 years old, it may lack this basic safety features – and so it’s time to buy a new garage door opener.

9. Clear the Tracks

Make sure the tracks on either side of the door are free from debris and, if you are so inclined, you can use a level to check the plumb. Any major adjustments to tracks must be done by a professional garage door technician.

10. Groom Your Garage Door

Don’t forget to examine the door itself. Wood doors will need to be checked for water damage and warp, as well as chipped and peeling paint. Steel doors may have rust spots that need to be sanded, primed and painted. Wash your garage door regularly with a mild all-purpose cleaner at the same time you do your car.

Having a Thanksgiving Weekend Open House

To have an open house or not to have an open house over the Thanksgiving weekend: that is the question! Many sellers assume that the Thanksgiving holiday weekends and the week between Christmas and New Years Day are less than favorable times to have an open house. Some real estate agents disagree.

Less competition

Often, because both sellers and their agents assume the holidays are off limits, if you have an open house over the holidays, you’ll have less competition. Typically, the number of open houses during the Thanksgiving holiday is less than half what a normal weekend might have. That means your home may get more exposure than it would with more competition for the same day.

More serious buyers

Since many people have that weekend off, it may be the best opportunity for them to go out and look. When the buyer and seller both are serious, a holiday open house can be effective. When the buyers are motivated, they are more than happy to shirk Black Friday shopping in hopes of finding the right house. A recent survey of real estate agents revealed that two-thirds of them believe a Black Friday home seller is more serious and over sixty-one percent believe Black Friday buyers are more serious.

Year-end timing

If a buyer needs to complete the deal prior to the end of the year for financial reasons, the Thanksgiving weekend is the last opportunity for a big push toward that goal. Homebuyers waiting for their year-end bonuses to add to their down payment often take advantage of the holidays to house hunt.

Proximity

Young couples seeking to relocate nearer to family most often “come home” for the holidays. Since they are in the area anyway, they take the time to see what is available on the market. Exposing your home to buyers during this time may give them the impetus they need to make the move they already want to make.

Winter open house best practices

Holding an open house in winter has both advantages and disadvantages, so here are some best practices to make sure your open house is a success.

DON’Ts

• DON’T over decorate. While buyers may adore your holiday décor, they also want to be able to see the home’s features.
• DON’T forget to remove holiday feast leftovers. This includes airing out the smells of cooking from the day before. When a home is closed up in the winter, those stale odors linger even though those living in the home no longer smell them.
• DON’T hang around. Find a special place to take your family while your agent handles your open house. Buyers, even serious buyers, may be uncomfortable asking serious questions with the homeowner present.

DO’s

• DO put your pet in a safe place. Strangers in the home can make your pet anxious and potential buyers may find animals frightening or off-putting.
• DO turn on all the lights. In the winter, the sun sets early, and even a daytime open house may find a cloudy day. Potential buyers prefer light bright rooms. That means windows and blinds should be open as well.
• DO keep the heat to a comfortable temperature. While your family may prefer it cooler, or you choose to conserve energy by wearing sweaters and extra layers, do not assume your potential buyer will appreciate those efforts.

If you are considering a holiday open house, contact us immediately so that we have advance marketing in place for the best possible turnout.

What to Know about Fall Leaves and Your Home

This time of year, leaves turn beautiful shades of red, vermilion, orange and yellow. We enjoy their beauty. We take photographs. We collect them. Our children play in them. For a homeowner, however, leaves pose the possibility of damage to their landscaping, their home and their relationships.

Leaves and lawn-care

If you’re new to homeownership, you may not know that while allowing leaves to lay a thick carpet over your lawn is beautiful, a solid mat of large wet leaves, such as those from oak, maple or sycamore trees, can damage your lawn. They promote mold growth, cause moisture to run off rather than seep into the ground, and hide the grass from the winter sun.

Experts suggest keeping your lawn clear of leaves. Here are some options to consider:

• Raking. This historic method of dealing with leaves is still the preferred method for some lawns. If you have specialty turf, lightly raking and removing leaves protects your lawn from damage. Bag leaves or ad them to your compost pile. Remember that paper bags will decompose much more quickly than plastic ones. If your city offers leave removal, be sure to utilize the appropriate process required.
• Mulching. Many mowers have mulch settings that chop the leaves into smaller bits that you can leave on the lawn to decompose naturally, and add nutrients to the soil.
• Blowing. Many gardening professionals prefer blowing leaves out of flowerbeds and lawns with power blowers into large piles to then “vacuum” them up with large machinery and haul them away. Typically, you would hire a professional to do this since purchasing the equipment for yourself might be cost prohibitive.

Leaves and gutter-care

Blowing and falling leaves create problems for your gutters. Once most of the leaves have fallen, you should have your gutters inspected for clogs. A clogged gutter is more than just an inconvenience. It can cause water and ice to back up under your roof creating leaks and other damage. When rainwater overflows a clogged gutter or plugged downspout, your fascia and soffits are endangered, too. Water backing up a downspout may dislodge or warp gutters, pulling them away from your house. When water spills down the sides of your home, it damages windows, walls and even your foundation.

Consider a professional gutter-cleaning service, especially if your home has more than one story. You might investigate gutter guards if your property is particularly prone to leaf buildup. Your local gutter professional can help you determine what works best in your situation.

Leaves and relationships

Most municipalities consider leaves to be a natural product, so while a homeowner might be responsible for damage to a neighbor’s home from a falling branch, that is not the case with falling leaves. So, when the leaves from your yard blow into your neighbor’s yard, he may not have a legal claim, but it will strain your neighborly relationships. Make sure to talk to your new neighbors about the leaf situation. The best neighbors come up with a solution together.

The benefits of owning a second home

Even if you love your home and have not thought about buying a second home, you may reconsider after learning about the tax breaks available to those who own a second home. Many politicians and celebrities use their ownership of several homes to ease their tax burden and so can you! Buying real estate is good for the economy on all levels, so our government grants some special tax breaks to encourage this behavior. Low interest rates may make this option even more viable, too!

If you do not rent out your home, or your second home, all interest up to $1.1 million can be deducted from your income. If you decide to rent out your home, things change a bit and you have to report that income. However, if you rent out your home for fourteen days or less, it does not count. You could rent your home out for $30,000 for one week and the IRS would not care. It only counts past that fourteenth day.

In addition, you can deduct the property taxes from each and every home that you own. Lastly, owning a second home can allow you to reside in a state with more favorable taxes. As long as you live in a state for over half of the year, you can file your taxes in that state. Enjoy weekend getaways and tax breaks if you consider buying a second home and smile as you make your purchase.

What type of paint should you use?

Whether you’re preparing your home to move in, or preparing it to sell, choosing the right paint from the myriad choices available to day can be daunting. Paints come in up to six different finishes, so even if you’ve chosen the colors, you still have to decide on the finish for your application.
On a gradient from matte or flat to high gloss, there are both textural and visual differences in paint finishes. In texture, the gradient moves from a “dryer” feel to a “slicker” feel, but visually, it moves from less light reflective to more light reflective. Choosing the right finish for the type of room you are painting is essential for the longevity and visual pleasure of whatever colors you select. Here is a guide to help you with your decision:

• Matte Finish: Called either Flat Finish or Wall Paint, this basic paint type has a chalkier feel and is not light reflective. It also hides imperfections, cracks and bumps because light does not bounce off them. This finish works well on interior walls such as living rooms and bedrooms, but can be more difficult to clean and may mark easily. Because it absorbs rather than reflects light, a darker matte-finish paint color is perfect for a media room.
• Flat Enamel Finish: The addition of the enameling elements combines some of the advantages of flat paint with a more durable finish that holds up to periodic cleaning. This is a good choice for interior walls in homes with children. Sometimes this is called “Kids Room Paint.”
• Eggshell Finish: Slightly more durable and light reflective than matte or flat, eggshell has just a minimal amount of gloss added to it, and a deeper color saturation. It holds up to cleaning better and often works well for living rooms and dining rooms where more light-reflection is desirable but a glossier finish is not necessary.
• Satin Finish: Often used for window and door trim, or ceilings needing a more reflective finish such as a the bath area or a workroom, satin finish holds up to cleaning and resists stains, marks and smudges better than matte, flat enamel or eggshell.
• Semi-gloss Finish: Used for trim, doors, cabinets and railings, semi-gloss resists most stains and marks while cleaning more easily. It reflects and refracts light, so it magnifies imperfections or textures in the surface. When using semi-gloss, care with surface preparation is vital to the finished product. Semi-gloss can work well in bath areas too, where a more reflective surface is helpful to make the room lighter and brighter.
• Glossy Finish: When applied properly, glossy or high gloss paints have a reflective surface similar to enamel, and creates a smooth finish for furniture and cabinetry. Because of its light-reflective quality, a glossy finish reveals and amplifies imperfections, but is the easiest surface to clean. When using high-gloss paints, carefully follow preparation instructions to get the best results.