The best way to determine value or market price of a home is to secure independent appraisals on the propertytwo at least. Appraisal firms are located in the classified section of the telephone directory. These should be well-established firms with a reputation for impartiality, and you may want to check their reputation with your banker or with the Better Business Bureau.
In almost every city property tax rates are based on some kind of appraisal. This appraisal may be accurate and it may be fairly up-to-date. On the other hand, it may be far out-of-date and inaccurate to begin with, but it does offer some guide to the value of a property. A hypothetical tax on a home might be $850 per year. The rate might be $2.00 tax per $100 of assessed valuation. In $850 there are 425 "$2," so we multiply the 425 by $100 and we come out with an assessed valuation of $42,500. But we find that it is the policy of the local assessors to value property at 60 percent of the real value.
So we can find the real value by dividing the $42,500 by 60 percent and we arrive at the true appraised value of $70,830. This is what the assessors felt to be the true market value of the property at the time they appraised it, and one would have to know when the appraisal was made, through contact with the revenue department of the city, to determine how applicable to present day values the appraisal was.
In many cities there is a property directory indicating specifications on each dwellingdimensions of the land, appraised value of the land, appraised value of the structure, and often revenue stamps in dollars which stamps were affixed at the time the property was last sold. Since the stamps bear a direct relation to the price, from the stamp total the last sales price can be figured, and the year of sale is usually given. Thus there is some indication of the value of the property from its sales price in the past.
The other major factor in determining the soundness of a mortgage, either a first or second mortgage, is the financial soundness of the owner of the property. For starters, a credit report should be secured on him from the local credit agency in your city or town, and there is one for every town, although its office may be in a nearby city. Dun and Bradstreet can be induced to secure a report by application for such a report to your local banker. He will let you see the report, but it belongs to the bank, which will in all probability be a subscriber to the Dun and Bradstreet service. Stone's Mercantile Agency is another reputable credit reporting service located in many cities.
While the information on the homeowner contained in these credit reports is useful, it is not and cannot always be perfect. Sometimes past defaults are not discovered and judgments are not recorded, since a poor credit is not anxious to mention his defaults to the credit agency.