What if there are no comparable sales for your residential investment property?
So, you have a Broward County residential investment property that has served you well for many years, but for one reason or another, it has come time to divest yourself of this property. But perhaps your property is in a neighborhood where few sales have occurred in the last 90 days. How do you know that your appraiser will arrive at an accurate appraisal of your property's value if there just isn't anything out there to compare it to?
Never fear, apprisers have many options up their sleeve when they approach Broward county real estate assessments. Appraising a property is not an exact science; it involves a series of techniques that, taken together, give an informed opinion about the value of the real estate. In fact, there are at least six often-used ways to calculate the value of your real estate investment property, and comparable sales are just one of them. So when you're wondering what to do if there are no comparable sales for your property… read on.
For residential properties, the appraiser looks at the home in relation to similar homes in the area. Using the selling prices of comparable properties, the appraiser reaches a benchmark valuation, which he then adjusts up or down to deal with the subject property's individual features. However, for income-producing residential properties, a comparable sales approach isn't usually the best approach to determine the value of a property. Instead, the appraiser should look to other appraisal methods that take account of the income that the property could produce in the future.
Tools for your Appriser:
Instead of using the comparable sales approach, your appraiser could turn to one of the following approaches for your income property or any income-producing Broward county real estate assessment.
1. Income capitalization approach: This method tries to capture the income an investor can expect to derive from a particular property. That projected income could be derived in part from a comparison of other properties, as well as from an expected decrease in maintenance costs.
2. The Gross Rent Multiplier approach: The Gross Rent Multiplier method compares a property’s value potential by dividing the price of the property by its gross yearly income to produce a ratio. The ratio is an expression of value as compared to the property's potential income
3. Value per door: The value per door method is used primarily for apartment buildings, it simply determines the entire building’s worth based on the number of units.
4. Cost per rentable square foot: This method combines the usable space tenants can occupy with the space of any common areas in the building. Based on this combination, an assessor would calculate the cost per rentable square foot. Then, they'd compare that number to the rentable square foot of other properties in the market.
As you can see there are many approaches by with appraisers can calculate value when they approach Broward county real estate assessments, even if there are no comparable sales. Talk with the appraise to understand their approach and why they've chosen to apply that approach to your income-producing property.
In case you want to get a sense of the value of your income-producing property before calling an appraiser, it might seem daunting to try to know what do you do if there are no comparable sales. After all, for laymen, comparable sales are certainly the most intuitive way to estimate your home's value. Don't worry, with the proper research and a little help you can arrive at a good estimate of your property's value even without comparable sales.
Tools for You:
1. Widen Your Search: Start your research by trying to find comparable properties in a wider search parameter than is usually applied. If there are no comparable sales in the last 90 days in your neighborhood, expand your research to adjoining neighborhoods. The more similar the neighborhoods are, the better.
2. Use Tax Records: Look up the assessed value of your home. Every three years or so the county will assess your property for tax purposes. While this assessment might be too old to be accurate, it'll give you a good baseline. Find out when your home was last assessed by looking at your property tax bill or contacting the Broward county assessor's office.
3. Create a rough projection using what you know: You can project forward to the present to find a likely value estimate by utilizing your last property assessment, then researching the median price increase or decrease for your area. Apply this figure to your most recent estimate to get a more current probably price. For example, if your home was assessed five years ago at $200,000 and the area's prices have increased 15% since that year, you can assume a rough current value of $230,000.
4. User Peter Dacko and the Media Realty Team as a Resource: Peter Dacko and Media Realty offer no-obligation valuation reports for owners of income-producing properties in Broward County, Florida. As a seasoned broker and appraiser, he'll crunch the numbers and forensically research the market to provide an accurate and up-to-date valuation of your property… even if there are no comparable sales. Peter is an expert, so why rely on his knowledge and experience? There's no cost and no obligation.