Real Property Appraisals: A Primer
Their home's purchase is the largest investment most of us could ever make. Whether it's where you raise your family, a second vacation home or a rental fixer upper, the purchase of real property is an involved transaction that requires multiple people working in concert to make it all happen.
Practically all the parties involved are quite familiar. The most known person in the exchange is the real estate agent. Next, the bank provides the money necessary to bankroll the transaction. The title company ensures that all details of the sale are completed and that a clear title transfers from the seller to the purchaser.
So, what party makes sure the value of the property is consistent with the amount being paid? In comes the appraiser. We provide an unbiased estimate of what a buyer could expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Advantage Appraisal Services, LLC will ensure, you as an interested party, are informed.
Inspecting the subject property
To determine the true status of the property, it's our responsibility to first complete a thorough inspection. We must actually view aspects of the property, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really are present and are in the condition a typical buyer would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is correct and conveying the layout of the property. Most importantly, the appraiser identifies any obvious features - or defects - that would affect the value of the house.
Back at the office, an appraiser uses two or three approaches to determining the value of real property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.
This is where we gather information on local building costs, labor rates and other elements to determine how much it would cost to build a property nearly identical to the one 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 Sales
Appraisers get to know the communities in which they work. They thoroughly understand the value of specific 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 home being appraised. By assigning a dollar value to certain items such as fireplaces, room layout, appliance upgrades, extra bathrooms or bedrooms, or quality of construction, we add or subtract from each comparable's sales price so that they more accurately portray 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. At Advantage Appraisal Services, LLC, we are experts when it comes to knowing the worth of real estate features in Blackfoot and Bingham County neighborhoods. The sales comparison approach to value is most often given the most consideration when an appraisal is for a real estate exchange.
Valuation Using the Income Approach
A third way of valuing a house is sometimes employed when an area has a reasonable number of rental properties. In this scenario, the amount of revenue the property produces is taken into consideration along with income produced by similar properties to give an indicator of the current value.
The Bottom Line
Examining the data from all applicable approaches, the appraiser is then ready to state an estimated market value for the subject property. The estimate of value on the appraisal report is not always the final sales price even though it is likely the best indication of what a property is worth. 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 used as a guideline for lenders who don't want to loan a buyer more money than they could get back in case they had to put the property on the market again. At the end of the day, an appraiser from Advantage Appraisal Services, LLC will guarantee you get the most accurate property value, so you can make the most informed real estate decisions.