The Florida legislature and Governor Rick Scott have changed the sinkhole laws due to the insistence of Florida Insurance companies. This article was written before the changes were made. If you have a new sinkhole problem you may be out of luck. Contact your insurance company to see if you have sinkhole coverage. We continue to buy unrepaired sinkhole homes in Florida.
The three ways of determining market value of house.
1. The Cost Approach - The cost approach is based on the understanding that market participants relate value to the cost. In the cost approach the value of a property is derived by adding the estimated value of the land to the current cost of constructing a reproduction of replacement for the improvements and then subtracting the amount of depreciation. (i.e., deterioration and obsolescence) in the structures from all causes. This approach is particularly useful in valuing new or nearly new improvements and properties that are not frequently exchanged in the market. It is not the best way to evaluate a unrepaired sinkhole home.
2. The Income Capitalization Approach is used to appraise income-producing properties. The present value of the future benefits of property ownership is measured, and the property's anticipated income stream and resale value, or reversion are capitalized into a present value. There are two basic capitalization formulas: income/rate = value and income x factor = value (where facture = 1/rate). In discounted cash flow analysis, periodic income and the reversion may also be converted into present value by application of a specified discount rate. (This approach is more useful when the house is used as rental property.
3. Comparative Sales Analysis Approach
The sales comparison approach is most useful when a number of similar properties have recently been sold or are currently for sale in the subject property market. Using this approach, an appraiser produces a value indication by comparing a subject property with similar properties, called comparable sales. The sale prices of the properties that are judged to be most comparable tend to indicate a range in which the value indication for the subject property will fall.
An appraiser estimates the degree of similarity or difference between the subject property and the comparable sales by considering various elements of comparison. Real property rights conveyed, Financing Terms, Conditions of sale, Market conditions, Location, Physical characteristics, Economic characteristics, use, and Nonrealty components of value.
Dollar or percentage adjustments are then applied to the sale price of each comparable property with consideration for the real property interest involved. Adjustments are made to the sale price of the comparables because the prices of these properties are known, while the value of the subject property is not. Through this comparative procedure, the appraiser estimates the value defined in the problem identification as of a specific date. ( This approach is more appropriate when the house is not going to be used as a rental home.)
I am more than happy to have a more in depth discussion with you as to which method would be in your best interest. All sellers have different situations and sellers of homes that have been affected by sinkholes are all too common in Florida and most often require the expertise and experience of a professional who cares. Please call me and I will see what I can do to help you sell your home.
Sinkholes can be very dangerous and owners of homes with sinkholes are in a particularly precarious and stressful situation. It's important to understand that there is a solution to your problem and homeowners with sinkholes can actually come out ahead of the game. You can get out of the house you are in and have enough money to buy another home, which in many cases is the best way to go. Sink holes that have been repaired, often resurface only leaving the homeowner to re-live the nightmare. Why wait or take that chance?
Buying homes with sink holes is my expertise, helping homeowners whose homes have been damaged by sink holes is my passion.
sinkhole repair costs - what is the value of a sinkhole home in Florida - What are the sinkhole property values?