Decoding the Appraisal Process
Their home's purchase is the biggest transaction some could ever make. It doesn't matter if a primary residence, a second vacation home or one of many rentals, purchasing real property is a detailed transaction that requires multiple parties to pull it all off.
The majority of the parties participating are quite familiar. The real estate agent is the most known entity in the transaction. Then, the mortgage company provides the money needed to bankroll the exchange. And the title company sees to it that all areas of the sale are completed and that a clear title passes to the buyer from the seller.
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 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 Floyd Appraisal Works will ensure, you as an interested party, are informed.
Inspecting the subject property
Our first duty at Floyd Appraisal Works 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, living areas, etc, to ensure they indeed are present and are in the condition a typical person would expect them to be. To ensure the stated square footage is accurate and illustrate the layout of the house, the inspection often requires creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious amenities - or defects - that would have an impact on the value of the house.
Once the site has been inspected, we use two or three approaches to determining the value of real property: sales comparison and, in the case of a rental property, an income approach.
Here, we use information on local building costs, the cost of labor and other factors to figure out how much it would cost to build a property nearly identical 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.
Paired Sales Analysis
Appraisers become very familiar with the subdivisions in which they appraise. They innately understand the value of particular features to the homeowners of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the home at hand. Using knowledge of the value of certain items such as square footage, extra bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we adjust the comparable properties so that they more accurately portray the features of subject.
A true estimate of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. At Floyd Appraisal Works, we are experts in knowing the worth of particular items in Hohenwald and Lewis County neighborhoods. The sales comparison approach to value is typically given the most consideration when an appraisal is for a home sale.
Valuation Using the Income Approach
A third method of valuing approach to value is sometimes employed when a neighborhood has a reasonable number of renter occupied properties. In this situation, the amount of revenue the real estate yields is taken into consideration along with income produced by nearby properties to give an indicator of the current value.
The Bottom Line
Combining information from all approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. The estimate of value on the appraisal report is not always what's being paid for the property even though it is likely the best indication of what a property is worth. Prices 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 often used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. The bottom line is, an appraiser from Floyd Appraisal Works will help you discover the most accurate property value, so you can make wise real estate decisions.