What Are the Components of an Appraisal?
A home purchase can be the biggest investment many may ever consider. Whether it's where you raise your family, an additional vacation property or an investment, purchasing real property is an involved financial transaction that requires multiple people working in concert to make it all happen.
Most people are familiar with the parties taking part in the transaction. The real estate agent is the most known face in the transaction. Next, the bank provides the money required to fund the deal. The title company ensures that all aspects of the transaction are completed and that a clear title transfers from the seller to the buyer.
So, what party makes sure the real estate is worth the purchase price? This is where the appraiser comes in. 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 Allen Appraisal Service will ensure, you as an interested party, are informed.
Inspecting the subject property
Our first responsibility at Allen Appraisal Service is to inspect the property to ascertain its true status. We must actually see aspects of the property, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really exist and are in the condition a reasonable person would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is correct and conveying the layout of the property. Most importantly, the appraiser looks for any obvious features - or defects - that would affect the value of the property.
Next, after the inspection, we use two or three approaches to determining the value of the property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.
Here, we pull information on local construction costs, the cost of labor and other factors to derive how much it would cost to replace the property being appraised. This value often sets the upper limit 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 communities in which they work. They thoroughly understand the value of particular features to the homeowners of that area. Then, the appraiser researches recent transactions in the vicinity 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 additional storage space, we adjust the comparable properties so that they more accurately portray the features of subject.
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. When it comes to knowing the true worth of features of homes in St. George and Washington, Allen Appraisal Service is second to none. The sales comparison approach to value is usually awarded the most consideration when an appraisal is for a home exchange.
Valuation Using the Income Approach
A third method 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 property yields is taken into consideration along with other rents in the area for comparable properties to determine the current value.
Putting It All Together
Analyzing the data from all applicable approaches, the appraiser is then ready to document an estimated market value for the property at hand. 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 valuePrices can always be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. Regardless, the appraised value is typically employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. At the end of the day, an appraiser from Allen Appraisal Service will guarantee you discover the most accurate property value, so you can make the most informed real estate decisions.