Home Appraisals: A Primer
Their home's purchase can be the most serious financial decision some of us could ever encounter. Whether it's where you raise your family, an additional vacation property or one of many rentals, purchasing real property is a detailed transaction that requires multiple people working in concert to pull it all off.
You're likely to be familiar with the parties having a role in the transaction. The real estate agent is the most known entity in the exchange. Next, the lender provides the money necessary to finance the deal. And the title company ensures that all requirements of the sale are completed and that the title is clear to transfer from the seller to the buyer.
So, who's responsible for making sure the value of the real estate is consistent with the purchase price? In comes 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 Graham Appraisal will ensure, you as an interested party, are informed.
The inspection is where an appraisal starts
To ascertain an accurate status of the property, it's our responsibility to first conduct a thorough inspection. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they truly are present 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 accurate and illustrating 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 house.
Back at the office, we use two or three approaches to determining the value of the property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.
Here, the appraiser analyzes information on local building costs, labor rates and other factors to ascertain how much it would cost to build a property nearly identical to the one being appraised. This estimate commonly sets the upper limit on what a property would sell for. It's also the least used predictor of value.
Analyzing Comparable Sales
Appraisers get to know the neighborhoods in which they appraise. They innately understand the value of certain features to the people of that area. Then, the appraiser looks up recent transactions in the vicinity and finds properties which are 'comparable' to the subject being appraised. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, we add or subtract from each comparable's sales price so that they more accurately match the features of subject.
A valid 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 Graham Appraisal, we are an authority when it comes to knowing the worth of real estate features in Glasgow and Barren County neighborhoods. This approach to value is most often awarded the most consideration when an appraisal is for a home sale.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - we may use an additional approach to value. In this situation, the amount of income the real estate produces is factored in with other rents in the area for comparable properties to give an indicator of the current value.
Analyzing the data from all applicable approaches, the appraiser is then ready to put down an estimated market value for the subject property. 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 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.Regardless, the appraised value is often used 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 Graham Appraisal will guarantee you get the most fair and balanced property value, so you can make profitable real estate decisions.