Real Estate Appraisals: A Primer
Purchasing real estate can be the most significant investment some might ever make. It doesn't matter if where you raise your family, a seasonal vacation property or an investment, the purchase of real property is an involved financial transaction that requires multiple people working in concert to pull it all off.
The majority of the participants are very familiar. The real estate agent is the most familiar face in the transaction. Next, the lender provides the financial capital required to finance the exchange. The title company ensures that all details of the exchange are completed and that a clear title transfers to the buyer from the seller.
So, who's responsible for making sure the value of the property is in line with the amount being paid? This is where you meet the appraiser. We provide an unbiased estimate 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 Residential Appraisal Service, LLC will ensure, you as an interested party, are informed.
The inspection is where an appraisal starts
Our first task at Residential Appraisal Service, LLC is to inspect the property to ascertain its true status. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really are there and are in the shape a reasonable buyer would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is accurate and conveying the layout of the property. Most importantly, the appraiser identifies any obvious amenities - or defects - that would affect the value of the house.
Next, after the inspection, we use two or three approaches to determining the value of the property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.
This is where we analyze information on local construction costs, the cost of labor and other elements to ascertain how much it would cost to construct a property similar to the one being appraised. This estimate commonly sets the maximum on what a property would sell for. It's also the least used method.
Appraisers get to know the subdivisions in which they appraise. They innately understand the value of certain features to the people of that area. Then, the appraiser looks up recent sales in the vicinity and finds properties which are 'comparable' to the home at hand. Using knowledge of the value of certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or extra storage space, we adjust the comparable properties so that they more accurately match 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. At Residential Appraisal Service, LLC, we are an authority in knowing the worth of particular items in Monrovia and Frederick County neighborhoods. The sales comparison approach to value is most often given the most importance when an appraisal is for a real estate exchange.
Valuation Using the Income Approach
A third way of valuing a property is sometimes applied when an area has a measurable number of renter occupied properties. In this scenario, the amount of revenue the real estate yields is taken into consideration along with other rents in the area for comparable properties to derive the current value.
The Bottom Line
Examining the data from all approaches, the appraiser is then ready to state an estimated market value for the subject property. 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 a property's valueThere 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 the property is actually worth. The bottom line is, an appraiser from Residential Appraisal Service, LLC will guarantee you discover the most fair and balanced property value, so you can make wise real estate decisions.