Real Estate Appraisals: A Primer
Their home's purchase is the largest financial decision many of us may ever make. It doesn't matter if where you raise your family, a seasonal vacation property or a rental fixer upper, purchasing real property is an involved financial transaction that requires multiple people working in concert to make it all happen.
The majority of the participants are quite familiar. The real estate agent is the most known entity in the exchange. Next, the bank provides the financial capital needed to fund the deal. And ensuring all aspects of the exchange are completed and that the title is clear to transfer from the seller to the purchaser is the title company.
So, who's responsible for making sure the property is worth the purchase price? In comes the appraiser. We provide an unbiased opinion 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 Mid-South Appraisal Service will ensure, you as an interested party, are informed.
Appraisals start with the home inspection
Our first duty at Mid-South Appraisal Service is to inspect the property to ascertain its true status. We must see features first hand, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they truly exist and are in the shape a reasonable buyer would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is correct and conveying the layout of the property. Most importantly, the appraiser identifies any obvious features - or defects - that would have an impact on the value of the property.
Next, after the inspection, an appraiser uses 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 the appraiser gathers information on local construction costs, labor rates and other factors to calculate how much it would cost to replace the property being appraised. This figure usually sets the upper limit on what a property would sell for. The cost approach is also the least used predictor of value.
Appraisers are intimately familiar with the neighborhoods in which they appraise. They thoroughly understand the value of certain features to the homeowners of that area. Then, the appraiser looks up recent transactions in the neighborhood and finds properties which are 'comparable' to the real estate at hand. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, 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. At Mid-South Appraisal Service, we are experts when it comes to knowing the worth of particular items in Moody and Saint Clair County neighborhoods. This approach to value is usually given the most weight when an appraisal is for a home exchange.
Valuation Using the Income Approach
A third way of valuing real estate is sometimes used when a neighborhood has a reasonable number of renter occupied properties. In this case, the amount of income the real estate yields is taken into consideration along with income produced by similar properties to determine the current value.
Arriving at a Value Conclusion
Analyzing the data from all approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. The estimate of value on the appraisal report is not always the final sales price even though it is likely the best indication of a property's valueDepending on the specific circumstances of the buyer or seller, their level of urgency or a buyer's desire for that exact property, the closing price of a home can always be driven up or down.Regardless, the appraised value is often employed as a guideline for lenders who don't want to loan a buyer more money than they could recover in the event they had to put the property on the market again. The bottom line is, an appraiser from Mid-South Appraisal Service will guarantee you get the most accurate property value, so you can make wise real estate decisions.