Home Appraisals: A Primer
Their home's purchase can be the most serious transaction most of us might ever make. It doesn't matter if a primary residence, a seasonal vacation home or one of many rentals, the purchase of real property is a complex transaction that requires multiple parties to see it through.
It's likely you are familiar with the parties taking part in the transaction. The real estate agent is the most familiar entity in the exchange. Then, the bank provides the financial capital required to finance the exchange. And ensuring all areas of the sale are completed and that the title is clear to transfer to the buyer from the seller is the title company.
So, what party is 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 parcel of real estate, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Edwards Appraisal Service, Inc. will ensure, you as an interested party, are informed.
The inspection is where an appraisal begins
To ascertain the true status of the property, it's our responsibility to first perform a thorough inspection. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed are there and are in the condition a reasonable person would expect them to be. To make sure the stated size of the property is accurate and illustrate the layout of the home, the inspection often includes creating a sketch of the floorplan. Most importantly, we identify any obvious amenities - or defects - that would have an impact on the value of the property.
Back at the office, 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.
Here, the appraiser analyzes information on local construction costs, the cost of labor and other factors to calculate how much it would cost to construct a property nearly identical to the one being appraised. This figure usually sets the maximum on what a property would sell for. The cost approach is also the least used method.
Paired Sales Analysis
Appraisers can tell you a lot about the subdivisions in which they work. They thoroughly understand the value of specific features to the homeowners of that area. Then, the appraiser researches recent transactions 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 remodeled rooms, types of flooring, energy efficient items, patios and porches, or additional storage space, we adjust the comparable properties so that they more accurately portray the features of subject.
A valid estimate of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. When it comes to knowing the true worth of features of homes in Goldsboro and Wayne, Edwards Appraisal Service, Inc. can't be beat. This approach to value is most often given the most consideration when an appraisal is for a real estate sale.
Valuation Using the Income Approach
A third way of valuing a property is sometimes applied when a neighborhood has a measurable number of rental properties. In this scenario, the amount of income the real estate produces is factored in with income produced by neighboring properties to give an indicator of the current value.
The Bottom Line
Combining information from all applicable approaches, the appraiser is then ready to put down an estimated market value for the property at hand. 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 what a property is worth. 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 used as a guideline for lenders who don't want to loan a buyer more money than they could get back in the event they had to put the property on the market again. It all comes down to this, an appraiser from Edwards Appraisal Service, Inc. will help you get the most accurate property value, so you can make the most informed real estate decisions.