What Are the Components of an Appraisal?
Their home's purchase can be the most serious investment some might ever make. It doesn't matter if where you raise your family, a second vacation home or an investment, purchasing real property is an involved financial transaction that requires multiple people working in concert to see it through.
Practically all the parties participating are very familiar. The most recognizable person in the transaction is the real estate agent. Then, the bank provides the money necessary to bankroll the transaction. And the title company sees to it that all aspects of the transaction are completed and that the title is clear to pass from the seller to the buyer.
So, what party makes sure the value of the real estate is in line with the amount being paid? This is where you meet 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 APPRAISAL EXPERTS, LLC will ensure, you as an interested party, are informed.
Appraisals begin with the home inspection
Our first duty at APPRAISAL EXPERTS, LLC is to inspect the property to ascertain its true status. We must physically view aspects of the property, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed are there and are in the condition a typical person 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 look for any obvious features - or defects - that would have an impact on the value of the house.
Once the site has been inspected, 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, the appraiser uses information on local construction costs, the cost of labor and other elements to calculate how much it would cost to construct a property nearly identical to the one being appraised. This value usually sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.
Analyzing Comparable Sales
Appraisers can tell you a lot about the communities in which they appraise. They innately understand the value of certain features to the residents of that area. Then, the appraiser researches recent sales in the vicinity and finds properties which are 'comparable' to the property in question. 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 adjust the comparable properties so that they more accurately portray the features of subject.
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 putting a value on features of homes in Saint Louis and Saint Louis, APPRAISAL EXPERTS, LLC can't be beat. The sales comparison approach to value is typically given the most weight when an appraisal is for a real estate purchase.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - the appraiser may use a third method of valuing real estate. In this scenario, the amount of income the real estate yields is factored in with income produced by similar properties to derive the current value.
The Bottom Line
Examining the data from all approaches, the appraiser is then ready to put down an estimated market value for the subject property. The estimate of value at the bottom of the appraisal report is not necessarily what's being paid for the property even though it is likely the best indication of what a property is worth. 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.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. At the end of the day, an appraiser from APPRAISAL EXPERTS, LLC will help you get the most fair and balanced property value, so you can make profitable real estate decisions.