What Goes Into an Appraisal?
Their home's purchase is the most significant financial decision many of us might ever encounter. It doesn't matter if a main residence, a seasonal vacation home or a rental fixer upper, the purchase of real property is an involved transaction that requires multiple parties to make it all happen.
You're likely to be familiar with the parties having a role in the transaction. The real estate agent is the most recognizable entity in the exchange. Then, the mortgage company provides the financial capital needed to finance the deal. And ensuring all aspects of the transaction are completed and that a clear title passes from the seller to the purchaser is the title company.
So, who makes sure the value of the property is in line with the purchase price? This is where the appraiser comes in. We provide an unbiased opinion of what a buyer might 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 Allied Real Estate Appraisers will ensure, you as an interested party, are informed.
Appraisals begin with the property inspection
Our first duty at Allied Real Estate Appraisers is to inspect the property to determine its true status. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they indeed are there and are in the shape a typical buyer would expect them to be. To ensure the stated size of the property has not been misrepresented and illustrate the layout of the property, the inspection often entails creating a sketch of the floorplan. Most importantly, the appraiser looks for any obvious amenities - or defects - that would have an impact on the value of the house.
Following the inspection, we use two or three approaches to determining the value of real property: sales comparison and, in the case of a rental property, an income approach.
This is where we gather information on local construction costs, the cost of labor and other elements to ascertain how much it would cost to build a property similar to the one being appraised. This estimate 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 subdivisions in which they work. They innately understand the value of certain features to the homeowners of that area. Then, the appraiser looks up recent sales in close proximity to the subject and finds properties which are 'comparable' to the real estate being appraised. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, we add or subtract from each comparable's sales price so that they more accurately match the features of subject property.
In the end, 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 Flint and Genesee, Allied Real Estate Appraisers can't be beat. This approach to value is commonly given the most importance when an appraisal is for a real estate sale.
Valuation Using the Income Approach
A third method of valuing a house is sometimes employed when a neighborhood has a measurable number of rental properties. In this case, the amount of income the real estate yields is factored in with other rents in the area for comparable properties to determine the current value.
Putting It All Together
Examining the data from all applicable approaches, the appraiser is then ready to put down an estimated market value for the property at hand. It is important to note that while the appraised value is probably the best indication of what a property is worth, it may not be the final sales price. Prices can always be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. But 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 Allied Real Estate Appraisers will help you attain the most accurate property value, so you can make the most informed real estate decisions.