What Are the Components of an Appraisal?
A home purchase can be the most serious transaction many people might ever consider. It doesn't matter if where you raise your family, an additional vacation property or an investment, purchasing real property is a complex 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 person in the exchange. Next, the mortgage company provides the money required to bankroll the deal. And ensuring all details of the sale are completed and that a clear title transfers from the seller to the buyer is the title company.
So, who 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 might expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Midwest Appraisal and Consulting will ensure, you as an interested party, are informed.
Inspecting the subject property
To determine the true status of the property, it's our responsibility to first complete a thorough inspection. We must physically see aspects of the property, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really are there and are in the condition a typical buyer would expect them to be. To ensure the stated square footage is accurate and describe the layout of the house, the inspection often requires 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.
Following the inspection, we use two or three approaches to determining the value of real property: paired sales analysis and, in the case of a rental property, an income approach.
Here, we gather information on local construction costs, labor rates and other factors to ascertain how much it would cost to build a property comparable to the one being appraised. This value usually sets the maximum on what a property would sell for. The cost approach is also the least used method.
Appraisers are intimately familiar with the neighborhoods in which they appraise. They thoroughly understand the value of specific features to the residents of that area. Then, the appraiser looks up recent sales in the area and finds properties which are 'comparable' to the subject 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 are more accurately in line with the features of subject property.
After all differences have been accounted for, 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 associating a value with features of homes in Saint Joseph and Berrien, Midwest Appraisal and Consulting is your local authority. This approach to value is commonly awarded the most weight when an appraisal is for a real estate sale.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - we may use an additional way of valuing real estate. In this scenario, the amount of income the real estate produces is factored in with other rents in the area for comparable properties to determine the current value.
The Bottom Line
Combining information from all applicable approaches, the appraiser is then ready to document 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 typically used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. It all comes down to this, an appraiser from Midwest Appraisal and Consulting will guarantee you attain the most fair and balanced property value, so you can make profitable real estate decisions.