Buying a home can be the biggest transaction some could ever encounter. Whether it's where you raise your family, a second vacation property or a rental fixer upper, purchasing real property is an involved financial transaction that requires multiple parties to see it through.
Most of the parties participating are quite familiar. The most recognizable person in the exchange is the real estate agent. Next, the lender provides the financial capital required to bankroll the exchange. And the title company makes sure that all aspects of the sale are completed and that the title is clear to transfer to the buyer from the seller.
So, who's responsible for making sure the value of the real estate is consistent with the amount being paid? This is where the appraiser comes in. 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 The Appraisal Company, 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 responsibility to first complete a thorough inspection. We must physically view features, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they indeed are there and are in the shape a typical person would expect them to be. To ensure the stated size of the property has not been misrepresented and document the layout of the property, the inspection often includes creating a sketch of the floorplan. Most importantly, the appraiser looks for any obvious features - or defects - that would affect the value of the property.
Following the inspection, 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.
This is where we gather information on local construction costs, labor rates and other elements to calculate how much it would cost to replace the property being appraised. This estimate commonly sets the upper limit on what a property would sell for. The cost approach is also the least used method.
Appraisers get to know the subdivisions in which they work. They innately understand the value of certain features to the people of that area. Then, the appraiser researches recent transactions in the vicinity and finds properties which are 'comparable' to the home in question. Using knowledge of the value of certain items such as upgraded appliances, additional 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.
An opinion of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. When it comes to valuing features of homes in Dixon and Pulaski, The Appraisal Company, LLC. is second to none. This approach to value is commonly given the most importance 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 income the real estate produces is taken into consideration along with other rents in the area for comparable properties to give an indicator of the current value.
Putting It All Together
Examining the data from all approaches, the appraiser is then ready to put down an estimated market value for the property in question. It is important to note that while the appraised value is probably the most accurate indication of what a house is worth, it may not be the price at which the property closes. Prices can always be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. 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 The Appraisal Company, LLC. will guarantee you attain the most fair and balanced property value, so you can make profitable real estate decisions.