Real Property Appraisals: A PrimerBuying a house can be the most important financial decision many of us might ever make. Whether it's a main residence, a second vacation home or one of many rentals, purchasing real property is a detailed financial transaction that requires multiple parties to see it through.
Most of the parties involved are quite familiar. The most familiar person in the exchange is the real estate agent. Next, the bank provides the financial capital necessary to finance the transaction. The title company ensures that all details of the sale are completed and that the title is clear to transfer to the buyer from the seller.
So who's responsible for making sure the value of the real estate is in line with the amount being paid? In comes the appraiser. We provide an unbiased opinion of what a buyer could expect to pay - or a seller receive - for a property, where both buyer and seller are informed parties. A professional Indiana licensed appraiser from Appraise It will ensure you as an interested party are informed.
The inspection is where an appraisal beginsOur first duty at Appraise It is to inspect the property to determine its true status. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly are present and are in the condition a typical buyer would expect them to be. To make sure the stated size of the property has not been misrepresented and convey the layout of the house, the inspection often entails creating a sketch of the floor plan. Most importantly, the appraiser looks for any obvious features - or defects - that would have an impact on the value of the house.
Next, after the inspection, we use two or three approaches when determining the value of the property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.
Cost ApproachHere, the appraiser analyzes information on local construction costs, the cost of labor and other factors to figure out how much it would cost to replace the property being appraised. This figure often sets the upper limit on what a property would sell for. The cost approach is also the least used method.
Analyzing Comparable SalesAppraisers are intimately familiar with the subdivisions in which they work. We thoroughly understand the value of particular features to the people of that area. Then, the appraiser researches recent sales in the neighborhood and finds properties which are 'comparable' to the real estate being appraised. By assigning a dollar value to certain items such as upgraded appliances, extra bathrooms, an additional living area, quality of construction, lot size, we adjust the comparable properties so that they are more accurately in line with the features of subject property.
Valuation Using the Income ApproachIn the case of income producing properties - rental houses for example - we may use an additional approach to value. In this scenario, the amount of income the property produces is taken into consideration along with other rents in the area for comparable properties to give an indicator of the current value.
The Bottom LineCombining information from all approaches, the appraiser is then ready to stipulate an estimated market value for the property at hand. The estimate of value on the appraisal report is not necessarily the final sales price even though it is likely the best indication of what a property is worth. Depending 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. But the appraised value is typically 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 sell the property again. The bottom line is: An appraiser from Appraise It will help you discover the most accurate property value, so you can make wise real estate decisions.