A home purchase can be the largest investment most might ever consider. Whether it's where you raise your family, a seasonal vacation home or a rental fixer upper, purchasing real property is a complex transaction that requires multiple parties to make it all happen.
Most people are familiar with the parties taking part in the transaction. The most familiar person in the exchange is the real estate agent. Next, the lender provides the money necessary to finance the exchange. And ensuring all requirements of the transaction are completed and that the title is clear to pass to the buyer from the seller is the title company.
So, who's responsible for making sure the value of the real estate is in line with the amount being paid? This is where you meet the appraiser. We provide an unbiased estimate of what a buyer might 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 will ensure, you as an interested party, are informed.
Appraisals begin with the property inspection
Our first responsibility at Floyd Appraisal Works is to inspect the property to ascertain its true status. We must see features hands on, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly are there and are in the condition a reasonable buyer would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is accurate and conveying the layout of the property. Most importantly, the appraiser looks for any obvious features - 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.
This is where we gather information on local construction costs, the cost of labor and other factors to calculate how much it would cost to build a property comparable to the one being appraised. This estimate usually sets the maximum on what a property would sell for. It's also the least used predictor of value.
Appraisers are intimately familiar with the neighborhoods in which they work. They innately understand the value of certain features to the residents of that area. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are 'comparable' to the real estate in question. 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.
A valid estimate 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 worth of features of homes in Hohenwald and Lewis, Floyd Appraisal Works can't be beat. This approach to value is usually given the most weight when an appraisal is for a home exchange.
Valuation Using the Income Approach
A third way of valuing approach to value is sometimes applied when an area has a measurable number of renter occupied properties. In this scenario, the amount of revenue 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.
Arriving at a Value Conclusion
Examining the data from all applicable approaches, the appraiser is then ready to document an estimated market value for the property in question. It is important to note that while the appraised value is probably the most accurate indication of what a property is worth, it probably will not be the final sales price. There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust the final price 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. Here's what it all boils down to, an appraiser from Floyd Appraisal Works will guarantee you discover the most fair and balanced property value, so you can make wise real estate decisions.