Four Methods to Determine a Property Value
Real estate appraisals are, of course, the best method of determining the value of a property. But did you know there are a few other methods that brokers and lenders will sometimes use to determine a value? Here are four of the most popular methods used:
- Broker Price Opinion (BPO). BPOs are used by lenders in certain situations – for example, pending foreclosure – where they don’t want to order a full appraisal, which costs more and takes more time. It’s important to note, though, that BPOs are not appraisals. They are merely used to get a property’s value.
- Comparative Market Analysis (CMA). When a realtor wants to calculate a property’s worth, he or she will use a computer-generated value known as a Comparative Market Analysis. Some agents use recently sold property with similar features or similarly listed properties to determine a number. CMAs are free from real estate agents, but because agents are looking for business, they will sometime skew the numbers to the buyer’s liking.
- Automated Valuation Model (AVM). Lenders use this automated computer program to analyze data regarding a property. At the end of the data analysis, the AVM creates a value range and places the property at a specific point within that range. AVMs tend to be of little practical use, however, because they don’t take into account renovations or other property alterations that could increase or decrease the value of a home.
- Real Estate Appraisal. Appraisals are done by licensed professionals to determine the market value of a home. Because they are performed by experts with real-world experience and years of training, they are the best choice for determining an accurate property value.
By: Present Value
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