What Are the Components of an Appraisal?
Their home's purchase can be the most serious financial decision some could ever encounter. Whether it's where you raise your family, an additional vacation property or an investment, the purchase of real property is a complex financial transaction that requires multiple people working in concert to pull it all off.
Practically all the parties involved are very familiar. The most recognizable person in the transaction is the real estate agent. Then, the bank provides the money required to fund the exchange. The title company sees to it that all requirements of the sale are completed and that a clear title transfers to the buyer from the seller.
So, who makes sure the real estate is worth the purchase price? This is where you meet the appraiser. We provide an unbiased opinion of what a buyer could 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 Associated Appraisal Services will ensure, you as an interested party, are informed.
Appraisals start with the inspection
Our first task at Associated Appraisal Services is to inspect the property to ascertain its true status. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really are there and are in the condition a typical person would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is correct and illustrating the layout of the property. Most importantly, the appraiser identifies any obvious amenities - or defects - that would affect the value of the property.
Following the inspection, 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 use information on local building costs, labor rates and other factors to determine how much it would cost to build a property nearly identical to the one being appraised. This value commonly sets the upper limit on what a property would sell for. It's also the least used predictor of value.
Paired Sales Analysis
Appraisers become very familiar with the neighborhoods in which they appraise. They innately understand the value of certain features to the residents of that area. Then, the appraiser researches recent transactions 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, additional bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we add or subtract from each comparable's sales price so that they are more accurately in line with 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. At Associated Appraisal Services, we are an authority when it comes to knowing the worth of particular items in La Place and St John The Baptist County neighborhoods. This approach to value is usually given the most consideration when an appraisal is for a home purchase.
Valuation Using the Income Approach
A third way of valuing approach to value is sometimes employed when an area has a measurable number of rental properties. In this situation, the amount of revenue the real estate yields is taken into consideration along with income produced by similar properties to give an indicator of the current value.
Putting It All Together
Analyzing the data from all 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 this amount is probably the most accurate indication of what a property is worth, it may not be the final sales price. There are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust the final price up or down. But the appraised value is typically used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. Here's what it all boils down to, an appraiser from Associated Appraisal Services will guarantee you discover the most accurate property value, so you can make wise real estate decisions.