What Are the Parts of an Appraisal?
Buying a home can be the largest financial decision some will ever encounter. Whether it's where you raise your family, a second vacation property or a rental fixer upper, purchasing real property is a detailed financial transaction that requires multiple parties to see it through.
Most of the participants are very familiar. The most familiar face in the exchange is the real estate agent. Then, the bank provides the money necessary to fund the transaction. And ensuring all areas of the exchange are completed and that a clear title passes to the buyer from the seller 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 estimate 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 Pierce Appraisal 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 duty to first complete a thorough inspection. We must actually view aspects of the property, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they truly are there and are in the condition a reasonable buyer would expect them to be. To ensure the stated size of the property has not been misrepresented and illustrate the layout of the house, the inspection often requires creating a sketch of the floorplan. Most importantly, we look for any obvious amenities - or defects - that would affect the value of the house.
Following the inspection, an appraiser uses two or three approaches to determining the value of real property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.
This is where the appraiser pulls information on local building costs, the cost of labor and other factors to figure out how much it would cost to replace the property being appraised. This value usually sets the maximum on what a property would sell for. It's also the least used predictor of value.
Analyzing Comparable Sales
Appraisers can tell you a lot about the neighborhoods in which they appraise. They thoroughly understand the value of particular features to the residents of that area. Then, the appraiser researches recent sales in the vicinity and finds properties which are 'comparable' to the real estate being appraised. By assigning a dollar value to certain items such as fireplaces, room layout, appliance upgrades, extra bathrooms or bedrooms, or quality of construction, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject.
An opinion 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 value of features of homes in Gering and Scotts Bluff, Pierce Appraisal is second to none. This approach to value is most often awarded the most consideration when an appraisal is for a real estate exchange.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - the appraiser may use an additional approach to value. In this scenario, the amount of income the real estate yields is taken into consideration along with other rents in the area for 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 at hand. The estimate of value at the bottom of the appraisal report is not necessarily what's being paid for the property even though it is likely the best indication of a property's valueDepending on the specific situations 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 get back in the event they had to sell the property again. At the end of the day, an appraiser from Pierce Appraisal will help you discover the most fair and balanced property value, so you can make wise real estate decisions.