What Goes Into an Appraisal?
A home purchase can be the largest transaction many of us may ever encounter. Whether it's a primary residence, a seasonal vacation home or a rental fixer upper, purchasing real property is a complex transaction that requires multiple parties to pull it all off.
Most people are familiar with the parties having a role in the transaction. The most recognizable face in the transaction is the real estate agent. Next, the mortgage company provides the money needed to fund the deal. And ensuring all areas of the exchange are completed and that the title is clear to pass to the buyer from the seller is the title company.
So, who's responsible for making sure the property is worth the purchase price? In comes the appraiser. We provide an unbiased estimate 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 Proficient Appraisal Services, LLC will ensure, you as an interested party, are informed.
Appraisals begin with the property inspection
To ascertain an accurate status of the property, it's our duty to first perform a thorough inspection. 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 present and are in the condition a reasonable buyer would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is correct and conveying the layout of the property. Most importantly, the appraiser identifies any obvious features - or defects - that would have an impact on the value of the property.
Back at the office, we use two or three approaches to determining the value of the property: sales comparison and, in the case of a rental property, an income approach.
This is where we pull information on local construction costs, the cost of labor and other elements to calculate how much it would cost to construct a property similar to the one being appraised. This figure commonly sets the maximum on what a property would sell for. It's also the least used predictor of value.
Appraisers are intimately familiar with the neighborhoods in which they work. They thoroughly understand the value of certain features to the residents of that area. Then, the appraiser researches recent sales in the neighborhood and finds properties which are 'comparable' to the real estate in question. Using knowledge of the value of certain items such as upgraded appliances, extra bathrooms, additional living area, quality of construction, lot size, we adjust the comparable properties so that they are more accurately in line with the features of subject.
Once all necessary adjustments have been made, 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 associating a value with features of homes in Sutton and Braxton, Proficient Appraisal Services, LLC can't be beat. The sales comparison approach to value is typically given the most weight when an appraisal is for a home purchase.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - we may use a third method of valuing real estate. In this scenario, the amount of income the real estate generates is factored in with other rents in the area for comparable properties to derive the current value.
Arriving at a Value Conclusion
Examining the data from all approaches, the appraiser is then ready to state an estimated market value for the property in question. It is important to note that while this amount is probably the best indication of what a house is worth, it probably will not be the final sales price. There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust the final price up or down. Regardless, 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 sell the property again. At the end of the day, an appraiser from Proficient Appraisal Services, LLC will help you discover the most fair and balanced property value, so you can make the most informed real estate decisions.