Real Estate Appraisals: A Primer
A home purchase can be the most important transaction most people will ever encounter. It doesn't matter if where you raise your family, a second vacation property or one of many rentals, purchasing real property is a detailed financial transaction that requires multiple people working in concert to see it through.
Most of the participants are quite familiar. The most known person in the exchange is the real estate agent. Next, the mortgage company provides the financial capital necessary to finance the deal. The title company sees to it that all areas of the transaction are completed and that the title is clear to transfer to the buyer from the seller.
So, who's responsible for making sure the property is worth the purchase price? This is where you meet the appraiser. We provide an unbiased opinion of what a buyer could expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from APPRAISAL EXPERTS, LLC will ensure, you as an interested party, are informed.
Appraisals start with the home inspection
Our first task at APPRAISAL EXPERTS, LLC is to inspect the property to ascertain its true status. We must physically see features, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they indeed exist and are in the condition a typical 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, we identify any obvious features - or defects - that would affect the value of the house.
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.
Here, we use information on local construction costs, the cost of labor and other elements to ascertain how much it would cost to replace the property being appraised. This figure usually sets the maximum on what a property would sell for. It's also the least used method.
Appraisers can tell you a lot about the neighborhoods in which they appraise. They thoroughly understand the value of particular features to the people of that area. Then, the appraiser looks up recent transactions in the neighborhood and finds properties which are 'comparable' to the real estate at hand. Using knowledge of the value of certain items such as square footage, extra bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject.
A true estimate of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. At APPRAISAL EXPERTS, LLC, we are experts when it comes to knowing the worth of real estate features in Saint Louis and Saint Louis County neighborhoods. The sales comparison approach to value is commonly awarded the most weight when an appraisal is for a real estate purchase.
Valuation Using the Income Approach
A third way of valuing a house is sometimes employed when an area has a reasonable number of rental properties. In this situation, the amount of income the real estate produces is taken into consideration along with other rents in the area for comparable properties to determine the current value.
Combining information from all approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. It is important to note that while the appraised value is probably the strongest indication of what a house is worth, it probably will not be the price at which the property closes. Depending on the specific circumstances 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.Regardless, the appraised value is often 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 APPRAISAL EXPERTS, LLC will guarantee you discover the most fair and balanced property value, so you can make profitable real estate decisions.