What Is an Appraisal?
A home purchase can be the largest financial decision many people may ever make. Whether it's where you raise your family, a second vacation property or an investment, purchasing real property is a detailed transaction that requires multiple people working in concert to pull it all off.
Practically all the people involved are very familiar. The most familiar face in the transaction is the real estate agent. Next, the bank provides the money necessary to fund the deal. And the title company sees to it that all areas of the exchange are completed and that a clear title passes from the seller to the purchaser.
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 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 Allied Real Estate Appraisers will ensure, you as an interested party, are informed.
Inspecting the subject property
To determine an accurate status of the property, it's our duty to first conduct 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 truly are present and are in the condition a typical buyer would expect them to be. To ensure the stated size of the property has not been misrepresented and describe the layout of the house, the inspection often includes creating a sketch of the floorplan. Most importantly, we look for any obvious amenities - or defects - that would affect the value of the property.
Back at the office, we use two or three approaches to determining the value of the property: paired sales analysis and, in the case of a rental property, an income approach.
Here, the appraiser uses information on local building costs, labor rates and other elements to derive how much it would cost to build a property comparable to the one being appraised. This estimate often sets the maximum on what a property would sell for. It's also the least used method.
Paired Sales Analysis
Appraisers can tell you a lot about the communities in which they appraise. They thoroughly understand the value of particular features to the residents of that area. Then, the appraiser researches recent transactions in close proximity to the subject and finds properties which are 'comparable' to the home at hand. By assigning a dollar value to certain items such as upgraded appliances, additional bathrooms, additional living area, quality of construction, lot size, we adjust the comparable properties so that they more accurately match the features of subject property.
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 valuing features of homes in Flint and Genesee, Allied Real Estate Appraisers can't be beat. The sales comparison approach to value is usually 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 - the appraiser may use an additional method of valuing real estate. In this situation, the amount of revenue the property yields is factored in with other rents in the area for comparable properties to determine the current value.
Arriving at a Value Conclusion
Combining information from all applicable approaches, the appraiser is then ready to document 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. It's not uncommon for prices to 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 used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. It all comes down to this, an appraiser from Allied Real Estate Appraisers will help you attain the most accurate property value, so you can make profitable real estate decisions.