What are the parts of an appraisal?Buying a house can be the most serious investment most of us might ever make. It doesn't matter if it's where you raise your family, an additional vacation home or an investment property, the purchase of real property is a detailed financial transaction that requires multiple parties to see it through.
It's likely you are familiar with the parties taking part in the transaction. The real estate agent is the most known person in the transaction. Then, the mortgage company provides the money needed to finance the exchange. Ensuring all details of the transaction are completed and that the title is clear to pass from the seller to the purchaser is the title company.
So who's responsible for making sure the value of the real estate is consistent with the purchase price? This is where the appraiser comes in. We provide an unbiased opinion of what a buyer might expect to pay - or a seller receive - for a property, where both buyer and seller are informed parties.
The inspection is where an appraisal begins
To determine an accurate status of the property, it's our duty to first complete a thorough inspection. We must actually view aspects of the property, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really are there and are in the condition a typical person would expect them to be. The appraisal report often includes a sketch of the house, ensuring the square footage is accurate and illustrating the layout of the property. We also look for any obvious features - or defects - that would have an impact on the value of the house.
Sales Comparison Approach
Appraisers get to know the neighborhoods in which they appraise. We innately understand the value of specific features to the people of that area. Then, the appraiser looks up recent transactions in the vicinity and finds properties which are 'comparable' to the property in question. By assigning a dollar value to certain items such as property updates, types of flooring, energy efficient items, patios and porches, or additional storage space, we adjust the comparable properties so that they are more accurately in line with the features of subject.
When it comes to valuing features of homes in Greene, Christian, or Webster Counties, 1st Choice Appraisal is your local authority. This approach to value is usually given the most weight when an appraisal is for a real estate exchange.
Cost ApproachHere, we gather information on local building costs, labor rates and other elements to calculate how much it would cost to build a property nearly identical to the one being appraised. This value commonly sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.
Income ApproachA third method of valuing a property is sometimes applied when a neighborhood has a measurable number of rental properties. In this situation, the amount of revenue the property produces is taken into consideration along with other rents in the area for comparable properties to determine the current value.
Arriving at a Value ConclusionAnalyzing the data from all applicable approaches, the appraiser is then ready to document an estimated market value for the subject property. 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 could sell for in an open market. Depending on the specific situations 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. But the appraised value is typically employed as a guideline for lenders who don't want to loan a buyer more money than they could get back in case they had to sell the property again. The bottom line is: An appraiser from 1st Choice Appraisal will guarantee you attain the most accurate value opinion, so you can make wise real estate decisions.