Real Property Appraisals: A Primer
Purchasing a house can be the most important transaction many people will ever encounter. It doesn't matter if a primary residence, an additional vacation home or a rental fixer upper, purchasing real property is a detailed financial transaction that requires multiple parties to make it all happen.
Most of the people involved are very familiar. The real estate agent is the most recognizable face in the transaction. Then, the lender provides the financial capital necessary to fund the exchange. And ensuring all aspects of the transaction are completed and that a clear title transfers from the seller to the purchaser is the title company.
So, what party is responsible for making sure the property is worth the amount being paid? In comes the appraiser. We provide an unbiased opinion of what a buyer could 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 Appraisal Experts LLC will ensure, you as an interested party, are informed.
Inspecting the subject property
To ascertain the true status of the property, it's our responsibility to first complete a thorough inspection. We must see features hands on, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed are present and are in the condition a typical buyer would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is proper and illustrating the layout of the property. Most importantly, the appraiser identifies any obvious features - or defects - that would affect the value of the house.
Back at the office, an appraiser uses two or three approaches to determining the value of real property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.
Here, the appraiser uses information on local building costs, labor rates and other elements to calculate how much it would cost to replace the property being appraised. This estimate usually sets the maximum on what a property would sell for. It's also the least used method.
Analyzing Comparable Sales
Appraisers become very familiar with the subdivisions in which they appraise. They innately understand the value of certain features to the people of that area. Then, the appraiser researches recent sales in the neighborhood and finds properties which are 'comparable' to the home in question. Using knowledge of the value of certain items such as square footage, additional bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject property.
After all differences have been accounted for, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At Appraisal Experts LLC, we are experts in knowing the worth of particular items in Fishers and Maricopa County neighborhoods. The sales comparison approach to value is most often given the most importance when an appraisal is for a home sale.
Valuation Using the Income Approach
A third method of valuing a property is sometimes employed when a neighborhood has a measurable number of rental properties. In this situation, the amount of income the real estate yields is factored in with income produced by neighboring properties to give an indicator of the current value.
The Bottom Line
Combining information from all approaches, the appraiser is then ready to state an estimated market value for the subject property. Note: While the appraised value is probably the most reliable indication of what a property is worth, it probably will not be the final sales price. Depending on the individual circumstances of the buyer or seller, their level of urgency or a buyer's desire for that exact property, the closing price of a home can always be driven up or down.Regardless, 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 Appraisal Experts LLC will help you discover the most accurate property value, so you can make wise real estate decisions.