Real Estate Appraisals: A Primer
Buying a house is the biggest financial decision some may ever consider. Whether it's a main residence, an additional vacation home or a rental fixer upper, the purchase of real property is a complex financial transaction that requires multiple people working in concert to pull it all off.
It's likely you are familiar with the parties having a role in the transaction. The most familiar face in the transaction is the real estate agent. Next, the mortgage company provides the financial capital required to finance the exchange. And ensuring all aspects of the exchange are completed and that the title is clear to transfer from the seller to the purchaser is the title company.
So, who's responsible for making sure the real estate is worth the purchase price? This is where the appraiser comes in. We provide an unbiased estimate of what a buyer might expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Village Appraisal Ltd. 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 responsibility to first complete a thorough inspection. We must physically view features, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really are present and are in the shape a reasonable buyer would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is accurate and illustrating the layout of the property. Most importantly, we identify any obvious features - or defects - that would affect the value of the house.
After the inspection, an appraiser uses two or three approaches to determining the value of real property: paired sales analysis and, in the case of a rental property, an income approach.
This is where the appraiser gathers information on local construction costs, the cost of labor and other elements to derive how much it would cost to replace the property being appraised. This value commonly sets the maximum on what a property would sell for. It's also the least used predictor of value.
Appraisers can tell you a lot about the communities in which they work. They thoroughly understand the value of particular features to the homeowners of that area. Then, the appraiser researches recent transactions in close proximity to the subject and finds properties which are 'comparable' to the home at hand. By assigning a dollar value to certain items such as fireplaces, room layout, appliance upgrades, extra bathrooms or bedrooms, or quality of construction, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject.
Once all necessary adjustments have been made, 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, Village Appraisal Ltd. can't be beat. The sales comparison approach to value is usually given the most importance when an appraisal is for a real estate sale.
Valuation Using the Income Approach
A third method of valuing approach to value is sometimes used when an area has a measurable number of renter occupied properties. In this case, the amount of revenue the property produces is factored in with income produced by comparable properties to determine the current value.
Coming Up With The Final Value
Combining information from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the property in question. The estimate of value at the bottom of the appraisal report is not always the final sales price even though it is likely the best indication of what a property is worth. Depending on the individual 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 used 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. At the end of the day, an appraiser from Village Appraisal Ltd. will guarantee you get the most fair and balanced property value, so you can make profitable real estate decisions.