Real Estate Appraisals: A Primer
Purchasing a house is the most important financial decision many of us may ever consider. Whether it's where you raise your family, a second vacation home or an investment, the purchase of real property is a complex financial transaction that requires multiple parties to make it all happen.
Most people are familiar with the parties taking part in the transaction. The most known entity in the transaction is the real estate agent. Then, the lender provides the financial capital necessary to bankroll the transaction. And ensuring all details of the sale are completed and that a clear title transfers to the buyer from the seller is the title company.
So, what party makes sure the value of the property is consistent with the amount being paid? This is where you meet the appraiser. We provide an unbiased opinion 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 Harris Appraisals LLC will ensure, you as an interested party, are informed.
Inspecting the subject property
Our first duty at Harris Appraisals LLC is to inspect the property to determine its true status. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly exist and are in the condition a typical person would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is correct and illustrating the layout of the property. Most importantly, the appraiser looks for any obvious amenities - or defects - that would affect the value of the property.
Following the inspection, an appraiser uses 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 analyze information on local construction costs, labor rates and other elements to figure out how much it would cost to replace the property being appraised. This estimate commonly sets the maximum on what a property would sell for. It's also the least used predictor of value.
Paired Sales Analysis
Appraisers get to know the subdivisions in which they work. They thoroughly understand the value of certain features to the people of that area. Then, the appraiser looks up recent transactions in the area and finds properties which are 'comparable' to the home being appraised. Using knowledge of the value of certain items such as upgraded appliances, additional bathrooms, additional living area, quality of construction, lot size, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject property.
Once all necessary adjustments have been made, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At Harris Appraisals LLC, we are experts in knowing the worth of real estate features in Alexander City and Tallapoosa County neighborhoods. The sales comparison approach to value is most often given the most importance when an appraisal is for a home exchange.
Valuation Using the Income Approach
A third way of valuing a house is sometimes used when an area has a measurable number of renter occupied properties. In this scenario, the amount of revenue the property generates is factored in with other rents in the area for comparable properties to determine the current value.
Arriving at a Value Conclusion
Combining information from all applicable approaches, the appraiser is then ready to state an estimated market value for the property in question. The estimate of value on 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 the property is actually worth. It all comes down to this, an appraiser from Harris Appraisals LLC will help you attain the most accurate property value, so you can make the most informed real estate decisions.