Nailing down a home's worth

For most of us, our home is the most expensive investment we make.

Pay too much, and you lose money when you sell. Pay too little, and you'll probably want to know why someone is willing to sell below market.

Either way, it's important to know exactly what a property is worth before buying.

Enter the real estate appraiser.

In addition to determining a home's value, appraisers provide such information as square footage, lot size, and rebuilding cost. While real estate appraisers - who typically charge from $200 to $400 - are not property inspectors, they will point out problems requiring repair. And they will discount the value of the property by the estimated cost of repairs.

Appraisers also make observations about the neighborhood, including property-value trends and how long it typically takes to sell a house in the immediate area. Such information comes in handy if you want a second mortgage or anticipate selling your home.

Most mortgage lenders require a real estate appraisal before making a loan. And since you pay for that appraisal, you are entitled to a copy of it. Ask for it and keep it.

If you don't feel comfortable with a value given by the appraiser, experts say, get a second opinion.

A second appraisal adds another dimension, says Joe Alexander, associate director of the National Association of Real Estate Appraisers. "You are going to get a weighted average of the two. If one appraiser missed something or had a different opinion of value, there is a benefit in having an average of the two."

You can also turn to the Web for assistance. The National Realtors Association site (www.Realtor.com) lets you check recent home-sale prices. Just input your zip code and street address, and up pops the sale prices of houses in your neighborhood. The most recent sale, and the house most similar to yours, gives you the best indication of today's value.

Now, watch out for the tax collector. Every county in every state has a tax assessor's office. That office has access to the same property-value information that you do.

But keep in mind that values for tax assessments are typically lower than the real market value. "Many states do not have market-value assessments, but use statistical information to do mass appraisals," says Edward Crapo, president of the International Association of Assessing Officers. "That means that they tend to use middle tendencies of the average sales price in any given area."

In states where market value is used, tax assessors make adjustments that real estate appraisers don't. For example, property values are usually discounted by "the normal cost of a sales transaction, such as real estate commissions," says Mr. Crapo.

If you are ever unhappy with a property assessor's valuation of your property, you can make some noise.

"There are three levels of tax appeals in most tax-assessment offices," says Crapo. "These are basically an informal hearing, a semiformal judicial process, and, finally, an actual court procedure."

Homeowners can be somewhat intimidated by the process, he says, but they should know that most tax assessors make the first level a relaxed procedure.

"Preparation is the most important part of the initial step. Homeowners should do their homework and bring hard information about their property as well as similar properties," he says. "Is it properly classified on the zoning books? Is it the right piece of property?"

The appeal process is surprisingly successful at the first level. Nationwide, Crapo estimates that 20 to 30 percent of reviews at the first level favor the appellant.

The chances of prevailing, however, diminish sharply at the next two levels of appeal.

"The second step, involving a formal hearing, involves the assessor justifying his position and a hearing judge rendering a decision one way or the other," he says. "By this time, the assessors have solidified their position and the appellant is much less successful at this level. The chances of a favorable ruling diminish even further when it gets to a formal judicial process."

(c) Copyright 2001. The Christian Science Publishing Society