There’s a lot of news about home values and current appraisal values as well as the appraisal process. With markets changing so rapidly it can be a difficult process. The appraisers do not sit in a dark room and use a crystal ball to produce an all powerful document of a home’s value. There’s no magic involved. Here’s how it’s done.

An appraiser needs to compare similar recently sold properties. And it’s not just the final price that counts. They also factor in any "incentives" offered, such as sellers who pay closing costs or remodeling allowances. If similar properties have differences in lot value, condition, improvements adjustments are made.

Perhaps the most important factor that lenders review in an appraisal is the closing dates of the "comparables" (other homes by which yours is measured). Unfortunately, with today’s stricter lending requirements, most "comps" must have sold within the last 60 or even 45 days to carry weight. Markets change so quickly that any sale price over two months old may be completely irrelevant. In this market, in some slower selling areas, an appraiser needs to go further away to find recent sales, which occasionally makes the value suspect to some.

Now a few words about how foreclosures in a neighborhood affect determination of value. Technically, appraisers shouldn't consider them, because they don't fit the Appraisal Institute's definition of "a property reasonably exposed in a competitive market." However, if several area homes have been abandoned, the market in such areas is in fact being driven by distressed sales and the appraised value will reflect this fact.

If you're planning to sell, an experienced Realtor can make you a Comparative Market Analyses which can give you a good approximation of appraised value. If you have concerns about the accuracy of this value, you can order your own appraisal and have this ready to support the value of your home. Unfortunately, an appraisal will be considered out of date within a month or two after the date of completion will no longer have any authority.

If you can hear the whispers below the din of panic, you know that the recent financial and housing collapses have actually created some amazing opportunities for smart investors. Low interest rates and depressed property values have combined in an environment favorable for long-term gains.

It may not be for everyone, but if you're in the right financial position, you have plenty of options. However, there is a right way and a wrong way to invest, and it's the wrong way that led so many to suffer in the recent housing crisis.

Don't think about investing in real estate until you've saved up for your nest egg and have held or reduced your expenses to keep it growing. Your money doesn't work for you unless it's your money.

Similarly, don't begin your investment adventure until you've polished up your credit score. The best opportunities go to those with upfront cash and excellent credit. Maximize your borrowed capital by making sure you get the lowest interest rates and best terms.

It then follows that you should not over-borrow. Real estate markets are continually cycling up and down. Learn the lessons of the recent debacle, and don't over-leverage yourself to the point you can't survive a down period in the cycle. If you're smart about it, you won't get rich quick, but you will get rich right!

When you receive an Offer to Purchase your home or property, most people are likely to focus on the price alone. With a full price offer, you might be ecstatic enough that you don’t read the ‘fine print’, the contingencies, and how these can affect the likelihood of a successful sale.

As an example, most offers have a mortgage contingency, stating that the buyer will secure financing at a certain rate and for a certain term. These factors have to be realistic. A buyer seeking a 30-year loan at 4% with no points may be hedging their bets. Your real estate agent should know what the current terms are for financing and can advise you. Unrealistic terms can allow the buyer to back out if they get cold feet or find another property they prefer.

Another sticky contingency more common these days is when a buyer states that they must sell their home before they can finalize the purchase of yours. There has to be a realistic time limit, so the buyer doesn't tie up your listing.

It may be wise to respond with a "kick-out" clause that allows you to keep your home on the market while the buyers promote theirs, offering them a 72-hour period to fulfill the contract if you should receive another offer in the interim.

Other issues are inspection periods and seller concessions.

These examples are just the tip of the iceberg, so sit and discuss each line of the offer with your agent before making your decision.

The number of square feet in a home is a factor in home selection because merely stating the number of rooms will not tell the whole story.

Generally when a home is listed for sale, the real estate agent will include the square footage from one of a number of possible sources.

The most accurate would be measuring the home. Inside, all the rooms are measured and described. This may provide the most accurate measurement of living space. Living space does not include such things as decks, terraces, garages, basements, and store rooms. The agent, however, will describe these spaces.

Other sources of square-foot information include:

Builder supplied floor plan: Often these can be less than completely accurate because of last minute design changes or owner requested modifications.

The property owner: Most sellers round the living space upward. Not knowing the rules, they could also be including storage areas.

Public records: Square footage may not be accurate for homes that have been remodeled or added onto over the years. Some are done without building permits, so these would not be included in public records.

An appraiser: An appraiser's figure could also be different from public records.

Buyers often compare the square footage with the price of a home in order to determine a price-per-square-foot. Unless the home is located in a recently-built development where all houses have similar amenities, this figure does not give an accurate picture of value as it doesn't include the value of the lot as well as location differences.

Also, just judging interior space by stated square footage can be very misleading as some open plan homes give the perception of much larger living areas then other homes that may have multiple partitions with many interior rooms.

Do not base your choice of homes on square footage or price per square foot alone. Let it be a rough guide only.