What Are the Parts of an Appraisal?
Getting a house is the most important transaction most might ever encounter. Whether it's a main residence, an additional vacation property or an investment, the purchase of real property is an involved transaction that requires multiple people working in concert to pull it all off.
You're probably familiar with the parties taking part in the transaction. The most known face in the transaction is the real estate agent. Next, the mortgage company provides the financial capital necessary to fund the exchange. The title company ensures that all areas of the sale are completed and that the title is clear to transfer from the seller to the purchaser.
So, who makes sure the real estate is worth 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 parcel of real estate, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Floyd Appraisal Works Inc will ensure, you as an interested party, are informed.
Inspecting the subject property
Our first duty at Floyd Appraisal Works Inc is to inspect the property to ascertain its true status. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed are there and are in the shape a typical person would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is proper and illustrating the layout of the property. Most importantly, we identify any obvious amenities - or defects - that would affect the value of the property.
Once the site has been inspected, we use two or three approaches to determining the value of the property: paired sales analysis and, in the case of a rental property, an income approach.
Here, the appraiser uses information on local building 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 maximum on what a property would sell for. It's also the least used method.
Analyzing Comparable Sales
Appraisers become very familiar with the subdivisions in which they work. They thoroughly understand the value of certain features to the residents of that area. Then, the appraiser looks up recent sales in the vicinity and finds properties which are 'comparable' to the property 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 are more accurately in line with the features of subject property.
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. At Floyd Appraisal Works Inc, we are an authority when it comes to knowing the value of real estate features in Hohenwald and Lewis County neighborhoods. This approach to value is usually given the most consideration when an appraisal is for a home purchase.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - we may use a third approach to value. In this case, the amount of income the property produces is taken into consideration along with income produced by comparable properties to derive the current value.
The Bottom Line
Examining the data from all applicable approaches, the appraiser is then ready to document an estimated market value for the subject property. It is important to note that while the appraised value is probably the best indication of what a house is worth, it may not be the price at which the property closes. It's not uncommon for prices to 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 they could get back in the event they had to sell the property again. Here's what it all boils down to, an appraiser from Floyd Appraisal Works Inc will guarantee you attain the most fair and balanced property value, so you can make wise real estate decisions.