How to get a dispassionate appraisal of what a house is worth
June 18, 2012 6:10 AM   Subscribe

What's the most dispassionate way to determine what a house is worth? Uncle owns a house and may sell it to us at a favorable rate, but we'd like to figure out a fair price to set overall, so that Uncle isn't shafted but we don't overpay, either.

Some of the variables at play:

- General area: VERY VERY good. Schools, town amenities, safety all A+.

- Specific area: mixed. Near a loud/dirty interstate highway, but also near a convenient commuter rail station. Small property, shared driveway. The yard has been neglected and would need tree work and possibly a retaining wall.

- House overview: Structurally sound, no leaks, no asbestos, no insect problems, has a dry basement.

- House details: Needs new HVAC, new boiler, new windows. Has not been renovated/updated in 25 years (has original carpets, kitchen, bathroom, paint).
posted by xo to Home & Garden (17 answers total)
Have you seen what Zillow says? It's not the most accurate, but it might be worth it as a starting point.
posted by Comrade_robot at 6:14 AM on June 18, 2012

Use the same process an appraiser would use (or, even better, just hire an appraiser). Look at recently sold comparable houses, and adjust upward and downward for differences. If your area is covered by Redfin, they have a Home Price tool that will help you find comps and do the math, but unless the house is basically identical to the comps, you'll still need to do a fair amount of manual analysis.
posted by primethyme at 6:15 AM on June 18, 2012 [5 favorites]

Nthing Zillow, it's close but it might be off a bit. We are selling our home right now and Zillow was off by about $10k. Can you have an appraisal?
posted by getawaysticks at 6:15 AM on June 18, 2012

What are comparable houses - of the same age, size, acreage, etc - in the area going for? Start with a best-case price and then back out any necessary repairs (like the HVAC and boiler). A new AC/furnace system for my house, for example, is probably going to run 5K-7K when it finally becomes necessary to replace it.

Landscaping and tree work (on balance) is pretty inexpensive compared to the price of a house. The retaining wall might be worth quoting out just to see how much earth-moving would be required.

You can check the local papers (or Zillow, as mentioned above) to get an idea on comps for the area.
posted by jquinby at 6:17 AM on June 18, 2012

Hire an appraiser - their report should include comparisons with similar properties as well as a valuation of the house.
posted by rmd1023 at 6:18 AM on June 18, 2012 [3 favorites]

Why would you note hire an appraiser? It's a few hundred bucks, but well worth it for the name of family peace.

Zillow is wildly off on the appraised value of my home as well as the homes of most people I know. It depends on the area you're in, but I would not use Zillow alone. You can also use comps from for-sale homes in the region - looking for the specifics that you list above, including needed renovations/updates.

I'd hire an appraiser.
posted by peanut_mcgillicuty at 6:19 AM on June 18, 2012 [1 favorite]

Hire an appraiser, who will give you an objective evaluation based on location, size, configuration, and general condition. Then, get a quote from a contractor (or, better yet, three) for any necessary repairs.
posted by mkultra at 6:39 AM on June 18, 2012

Don't use zillow.

You are about to spend a 6-figure sum on what may be one of the largest purchases of your life. Don't get cheap and cut corners to save a few hundred bucks here and there.

Hire a professional appraiser. Any realtor can put you in touch with an appraiser.
posted by Flood at 6:48 AM on June 18, 2012 [2 favorites]

Hire an appraiser.

AND HIRE AN INSPECTOR. No matter what it looks like to you or your uncle, or what you think looks structurally sound or free of insects, you need a professional to confirm that. Inspectors will also ensure everything is up to code. No matter who is selling you the house, buying it without getting it professionally inspected is foolish.
posted by oneironaut at 7:02 AM on June 18, 2012 [9 favorites]

Hire an appraiser. In my area zillow can be off by 5-10%
posted by bitdamaged at 7:03 AM on June 18, 2012

Nthing appraiser and inspector.

This will be money well spent. If the appraisal comes in low, great, you have proof to show uncle, if it comes in too high, no problem, walk away if you can't afford it.

The Inspector will give you a good idea of any issues with the structure, impending things that will need to be fixed (such as electrical, plumbing, roof, foundation.)

Don't cheap out on the inspection, get the guy who has good equipment, a camera to view the plumbing, pay special attention the the connection to the sewer. People think that if the sewer line is broken that either the municipality is responsible or your insurance will pay. Neither of these is true. It's all on you! $200 for a guy to run a camera through your pipes is money well spent if there's an issue. FYI, it cost me $7000 to replace the pipe and $2000 to put the landscaping back together. DO THIS!

You want someone who has a moisture detecting camera and infra red.

You have to be 3 times as dilligent when doing business with family members. Both to insure that neither of you feels ripped off, and for your peace of mind regarding the possible issues with the house.

Just because you're buying from a family member doesn't mean that there isn't something dreadful lurking in your house to destroy your bank account.
posted by Ruthless Bunny at 7:21 AM on June 18, 2012

As a seller, hiring an inspector can be a double-edged sword. Depending on disclosure laws in your state, you probably need to disclose any and all issues the inspector finds, even if you choose not to fix them. That means you're probably going to be presenting a much more thorough disclosure than other similar houses, which theoretically buyers should appreciate, but will scare many off. Sometimes it's better to not know about such issues, so you're not obligated to tell them to all potential buyers, and let the buyers do their own due diligence with their own inspector. They'll probably find the same issues, and negotiate repairs for them, but that's a standard and expected part of the home buying process.

Sometimes ignorance is bliss.
posted by primethyme at 7:55 AM on June 18, 2012

Never mind, I'm an idiot. Between reading the post this morning and coming back to read the replies, I forgot OP is looking to *buy* the house. Obviously, an inspection is key.
posted by primethyme at 8:04 AM on June 18, 2012 [1 favorite]

As a side note, be careful about how "favorable" your price is. If you are getting financing for the purchase of the home, you will run into problems when you try to buy a home that is appraised by the bank for $200k but your uncle is willing to sell to you for $120k. The key is what is the fair market value of the home; a qualified professional appraiser will be able to tell you this. Then, you take your inspector's report and make the necessary adjustments.

While a real estate agent could likely help you, you may want a real estate attorney involved just because this is not an arm's length transaction.

Best of luck.
posted by FergieBelle at 9:15 AM on June 18, 2012

Zillow is designed to be used to give people looking at a particular area a very very rough idea of the general housing values in that area, not to be used to set prices for any particular house.

When realtors and appraisers are determining the value of the house, they use (as others have said) "comps", or the sale price (not the asking price!) of comparable houses in the area.

Agree with everyone who says to hire an appraiser. It's a good investment in your relationship with your uncle, and having a professional appraisal will be key in getting a mortgage.
posted by Sidhedevil at 9:58 AM on June 18, 2012

You may want and need to hire TWO appraisers -- or, more to the point, you will want to hire one appraiser, and your uncle will want to hire the other. You may agree to, say, average their results if they're within 10% of each other, or hire a "tie-breaker" if they're not.

We ran into this problem in a different kind of situation -- an appraiser really can't be "neutral". They're usually brought in after the price of a house has been set, and their job is to determine if that price is plausible or implausible. They really don't usually come up with values de novo.

So an appraiser can sanity-check your guess of what the house is worth, but there's also going to remain the great truth of real estate, which is that the only true value of a given house is what someone is willing to pay for it.
posted by endless_forms at 10:14 AM on June 18, 2012

Oh BTW what I think is fair is to get it appraised and then knock 5% off the price.

If he sold it traditionally he'd spend 6% on realtor fees so he'd get a fair price and you'd get a slight discount.
posted by bitdamaged at 11:12 AM on June 18, 2012 [1 favorite]

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