What Goes Into an Appraisal?
Buying a house is the largest transaction most of us could ever make. It doesn't matter if a primary residence, a seasonal vacation home or an investment, the purchase of real property is a complex financial transaction that requires multiple parties to see it through.
The majority of the parties involved are very familiar. The real estate agent is the most familiar entity in the transaction. Then, the bank provides the money necessary to finance the exchange. And ensuring all requirements of the exchange are completed and that the title is clear to transfer to the buyer from the seller is the title company.
So, what party is responsible for making sure the real estate is worth the amount being paid? In comes 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 Residential Appraisal Service, LLC will ensure, you as an interested party, are informed.
The inspection is where an appraisal begins
Our first duty at Residential Appraisal Service, LLC is to inspect the property to ascertain its true status. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they truly exist 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 document the layout of the property, the inspection often includes creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious amenities - or defects - that would affect the value of the house.
Once the site has been inspected, 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.
Here, we gather information on local construction costs, labor rates and other factors to derive how much it would cost to construct a property similar to the one being appraised. This figure usually sets the upper limit on what a property would sell for. The cost approach is also the least used method.
Paired Sales Analysis
Appraisers can tell you a lot about the neighborhoods in which they work. They innately understand the value of particular features to the residents of that area. Then, the appraiser researches recent transactions in the vicinity and finds properties which are 'comparable' to the real estate being appraised. Using knowledge of the value of certain items such as upgraded appliances, extra bathrooms, additional living area, quality of construction, lot size, we add or subtract from each comparable's sales price so that they more accurately match the features of subject.
After all differences have been accounted for, 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 valuing features of homes in Monrovia and Frederick, Residential Appraisal Service, LLC is your local authority. This approach to value is most often awarded the most importance when an appraisal is for a real estate sale.
Valuation Using the Income Approach
A third way of valuing real estate is sometimes employed when an area has a measurable number of rental properties. In this case, the amount of revenue the real estate produces is taken into consideration along with income produced by neighboring properties to give an indicator of the current value.
Analyzing the data from all applicable approaches, the appraiser is then ready to state an estimated market value for the property in question. Note: While the appraised value is probably the most reliable indication of what a property is worth, it probably will not be the price at which the property closes. 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 used as a guideline for lenders who don't want to loan a buyer more money than they could recover in case they had to put the property on the market again. Here's what it all boils down to, an appraiser from Residential Appraisal Service, LLC will help you discover the most fair and balanced property value, so you can make profitable real estate decisions.