CHAPTER 6 Determining the Value of an Inherited Home
There are multiple ways to determine the value of an inherited home. It is not a simple formula, nor an entirely mathematical one. Many elements factor into the decision. You often see similar and similarly situated houses sell for very different prices. A calculated home value is not necessarily what you believe your inherited home is worth. Recognizing this helps avoid overpricing, one of the most common reasons for a home to spend months languishing unsold on the market. Familiarity with the real estate terms market value, appraisal value, and assessed value can save you a lot of disappointment and frustration and allow you to more meaningfully engage in setting a home’s listing price. The most-used definition of “market value” is “the most probable price a property should bring in a competitive, open market under conditions requisite to a fair sale.” Essentially, this is a pre- negotiation opinion of what a house should bring in its local market, i.e., its geographical area, generally confined to a specific region such as a suburb or neighborhood. “Appraisal value” is based on “an evaluation of a property’s worth at a given point in time that is performed by a professional appraiser.” Appraised value is an important factor in loan underwriting and determines how much money may be borrowed and under what terms. For example, the Loan to Value (LTV) ratio is based on the appraised value. Where LTV is greater than 80%, the lender will generally require the borrower to buy mortgage insurance. 36
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