Real Property Appraisals: A Primer
A home purchase can be the biggest financial decision some people might ever consider. It doesn't matter if where you raise your family, an additional vacation home or one of many rentals, purchasing real property is a detailed transaction that requires multiple people working in concert to pull it all off.
Most of the participants are quite familiar. The real estate agent is the most known face in the transaction. Then, the mortgage company provides the financial capital required to bankroll the deal. And the title company ensures that all details of the exchange are completed and that the title is clear to transfer to the buyer from the seller.
So, what party is responsible for making sure the value of the real estate is consistent with the amount being paid? This is where you meet the appraiser. We provide an unbiased estimate 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.
The inspection is where an appraisal begins
To determine the true status of the property, it's our duty to first conduct a thorough inspection. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they indeed are present and are in the condition a typical person would expect them to be. To make sure the stated size of the property is accurate and describe the layout of the property, the inspection often requires creating a sketch of the floorplan. Most importantly, the appraiser looks for any obvious features - or defects - that would affect the value of the property.
Following the inspection, an appraiser uses two or three approaches to determining the value of real property: sales comparison and, in the case of a rental property, an income approach.
This is where the appraiser uses information on local building costs, labor rates and other factors to calculate how much it would cost to replace the property being appraised. This value commonly sets the upper limit on what a property would sell for. It's also the least used method.
Paired Sales Analysis
Appraisers are intimately familiar with the neighborhoods in which they appraise. They innately understand the value of specific features to the people of that area. Then, the appraiser looks up recent sales in the area and finds properties which are 'comparable' to the property being appraised. 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 adjust the comparable properties 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 Fishers and Hamilton, Appraisal Experts LLC can't be beat. This approach to value is usually given the most weight when an appraisal is for a real estate sale.
Valuation Using the Income Approach
A third way of valuing a property is sometimes used when an area has a reasonable number of renter occupied properties. In this scenario, the amount of revenue the real estate generates is taken into consideration along with income produced by neighboring properties to derive the current value.
Coming Up With The Final Value
Combining information from all applicable approaches, the appraiser is then ready to state an estimated market value for the property in question. The estimate of value at the bottom of the appraisal report is not necessarily the final sales price even though it is likely the best indication of what a property is worth. There are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust the final price 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 they could recover in the event they had to put the property on the market again. Here's what it all boils down to, an appraiser from Appraisal Experts LLC will guarantee you attain the most fair and balanced property value, so you can make the most informed real estate decisions.