Real Estate Appraisals: A Primer
Purchasing real estate is the most significant transaction many will ever make. Whether it's where you raise your family, a seasonal vacation home or an investment, purchasing real property is a complex financial transaction that requires multiple people working in concert to see it through.
The majority of the people participating are very familiar. The most familiar face in the transaction is the real estate agent. Next, the mortgage company provides the money required to fund the transaction. And ensuring all aspects of the sale are completed and that a clear title transfers from the seller to the buyer is the title company.
So, what party makes sure the real estate is worth the purchase price? In comes the appraiser. We provide an unbiased opinion of what a buyer could expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from SpamRUs will ensure, you as an interested party, are informed.
The inspection is where an appraisal begins
Our first responsibility at SpamRUs is to inspect the property to determine its true status. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they really exist and are in the shape a typical person would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is accurate and conveying the layout of the property. Most importantly, the appraiser looks for any obvious features - or defects - that would have an impact on the value of the house.
Next, after the inspection, an appraiser uses two or three approaches to determining the value of real property: sales comparison and, in the case of a rental property, an income approach.
Here, the appraiser gathers information on local building costs, labor rates and other factors to derive how much it would cost to construct a property similar to the one being appraised. This figure often sets the maximum 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 work. They thoroughly understand the value of certain features to the people of that area. Then, the appraiser looks up recent transactions in the neighborhood and finds properties which are 'comparable' to the property being appraised. By assigning a dollar value to certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or extra storage space, we add or subtract from each comparable's sales price so that they more accurately match 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 associating a value with features of homes in Moore and Cleveland, SpamRUs is second to none. The sales comparison approach to value is typically awarded the most consideration when an appraisal is for a home purchase.
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 revenue the real estate generates is factored in with income produced by comparable properties to give an indicator of the current value.
Coming Up With The Final Value
Combining information from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the property in question. The estimate of value at the bottom of the appraisal report is not always the final sales price even though it is likely the best indication of a property's valueThere are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust an offer or listing 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 put the property on the market again. It all comes down to this, an appraiser from SpamRUs will guarantee you attain the most accurate property value, so you can make the most informed real estate decisions.