Real Estate Appraisals: A Primer
Acquiring real estate is the biggest financial decision many of us could ever make. It doesn't matter if a main residence, a seasonal vacation home or one of many rentals, the purchase of real property is an involved financial transaction that requires multiple parties to make it all happen.
It's likely you are familiar with the parties taking part in the transaction. The most recognizable face in the transaction is the real estate agent. Then, the lender provides the money needed to finance the exchange. And ensuring all aspects of the sale are completed and that the title is clear to pass to the buyer from the seller is the title company.
So, what party makes sure the value of the property is consistent with the purchase price? In comes the appraiser. 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. A licensed, certified, professional appraiser from Residential Appraisal Service, LLC will ensure, you as an interested party, are informed.
Inspecting the subject property
Our first duty at Residential Appraisal Service, LLC is to inspect the property to determine its true status. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they truly are present and are in the condition a typical person would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is accurate and illustrating the layout of the property. Most importantly, the appraiser looks for any obvious amenities - or defects - that would affect the value of the property.
After the inspection, an appraiser uses 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.
Here, we analyze information on local construction costs, the cost of labor and other factors to ascertain how much it would cost to replace the property being appraised. This value usually sets the maximum on what a property would sell for. The cost approach is also the least used method.
Analyzing Comparable Sales
Appraisers get to know the neighborhoods in which they appraise. They thoroughly understand the value of particular features to the residents of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the subject being appraised. By assigning a dollar value to certain items such as fireplaces, room layout, appliance upgrades, extra bathrooms or bedrooms, or quality of construction, we adjust the comparable properties so that they more accurately match the features of subject property.
An opinion of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. When it comes to knowing the true value of features of homes in Monrovia and Frederick, Residential Appraisal Service, LLC can't be beat. This approach to value is most often given the most importance when an appraisal is for a home exchange.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - we may use an additional method of valuing a property. In this scenario, the amount of income the property generates is factored in with other rents in the area for comparable properties to derive the current value.
Coming Up With The Final Value
Analyzing the data from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the property in question. The estimate of value on the appraisal report is not always what's being paid for the property even though it is likely the best indication of a property's valueDepending 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 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 get the most accurate property value, so you can make the most informed real estate decisions.