What Goes Into an Appraisal?
Getting real estate can be the biggest financial decision some could ever make. Whether it's a main residence, a seasonal vacation home or one of many rentals, purchasing real property is an involved transaction that requires multiple people working in concert to pull it all off.
Most of the parties participating are very familiar. The real estate agent is the most known entity in the exchange. Then, the mortgage company provides the financial capital required to finance the deal. The title company ensures that all aspects of the transaction are completed and that the title is clear to transfer to the buyer from the seller.
So, who makes sure the value of the property is in line with the purchase price? This is where you meet the appraiser. We provide an unbiased opinion of what a buyer might expect to pay — or a seller receive — for a parcel of real estate, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Certified Residential Inc will ensure, you as an interested party, are informed.
The inspection is where an appraisal starts
To ascertain an accurate status of the property, it's our duty to first perform a thorough inspection. We must physically see features, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they really exist and are in the shape a typical buyer would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is correct and conveying the layout of the property. Most importantly, we identify any obvious amenities - or defects - that would have an impact on the value of the house.
Once the site has been inspected, we use two or three approaches to determining the value of the property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.
Here, the appraiser gathers information on local building costs, labor rates and other factors to figure out how much it would cost to construct a property similar to the one being appraised. This value usually sets the upper limit on what a property would sell for. It's also the least used method.
Analyzing Comparable Sales
Appraisers become very familiar with the communities in which they appraise. They thoroughly understand the value of certain features to the residents of that area. Then, the appraiser looks up recent transactions in the area and finds properties which are 'comparable' to the real estate in question. By assigning a dollar value to certain items such as upgraded appliances, extra bathrooms, additional living area, quality of construction, lot size, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject.
In the end, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. When it comes to putting a value on features of homes in Lancaster and Fairfield, Certified Residential Inc is second to none. This approach to value is usually given the most consideration when an appraisal is for a home purchase.
Valuation Using the Income Approach
A third method of valuing approach to value is sometimes used when a neighborhood has a measurable number of renter occupied properties. In this scenario, the amount of income the property yields is taken into consideration along with other rents in the area for comparable properties to derive the current value.
The Bottom Line
Analyzing the data from all applicable approaches, the appraiser is then ready to put down an estimated market value for the property at hand. The estimate of value on the appraisal report is not necessarily what's being paid for the property even though it is likely the best indication of a property's valueThere are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust the final price up or down. But the appraised value is typically employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. It all comes down to this, an appraiser from Certified Residential Inc will guarantee you get the most accurate property value, so you can make profitable real estate decisions.