Determining a home's value, page 2
By Holden Lewis • Bankrate.com

Among Moulton's current clients is a twentysomething couple who are buying their first home. They have agreed to pay $592,000 for a house on Long Island. The owner is selling without an agent. Moulton told his clients that the iffiest part of the transaction is the appraisal -- the appraised value could be lower than the purchase price.

Sitting with his clients in the office, he looked up sale prices of houses within three-quarters of a mile from the home that his clients are buying. Prices varied from $450,000 to $750,000. "So the house they were buying seemed to be right in the middle," Moulton says. "I suggested that they drive by the other homes to get a sense of what they were buying versus what they found in the area."

After driving by and looking at the comps they identified online, Moulton's clients felt confident that they had offered a fair price, and they await the lender's appraisal.

Even if you do a good job of comparing a house to others, an experienced real estate agent probably can do better. An agent, Joslin says, will take into account the year a house is built, whether the home's architectural style (Colonial or ranch, for example) is in vogue, and other factors that affect a home's value.

In coming up with an opinion on a home's market value, the gold standard is to hire a licensed appraiser, the best source of unbiased opinion about how much a house is worth. There are several kinds of appraisals.

A full appraisal -- called a complete summary appraisal -- requires interior and exterior inspections, photos, drawings and comparisons with at least three nearby homes that have been sold recently. A complete summary appraisal can cost several hundred dollars, and it requires the owner's cooperation -- something you might not have if you're the prospective buyer.

To save money, you could ask an appraiser to prepare a condensed analysis called a 2055 form, with or without an interior inspection (an exterior-only inspection often is called a "drive by").

For even less money, you could spring for an automated valuation model, or AVM -- a computer estimate of the home's value. Many real estate-oriented Web sites have links to AVM services. Domania, operator of Home Price Check, offers an AVM service called Value Check. Other sites offering AVMs include HomeGain and Electronic Appraiser. Don't expect an AVM to yield as accurate or precise an opinion as a complete summary appraisal.

But it might be good enough to relieve your anxieties and let you get a good night's sleep.