What Are the Components of an Appraisal?
A home purchase is the most serious investment many people may ever encounter. It doesn't matter if a primary residence, an additional vacation property or a rental fixer upper, purchasing real property is a detailed financial transaction that requires multiple parties to see it through.
The majority of the people involved are very familiar. The most familiar person in the exchange is the real estate agent. Then, the lender provides the money required to fund the transaction. The title company makes sure that all areas of the transaction are completed and that the title is clear to pass to the buyer from the seller.
So, who makes sure the property is worth the purchase price? This is where you meet the appraiser. We provide an unbiased estimate of what a buyer could 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 APPRAISAL EXPERTS, LLC will ensure, you as an interested party, are informed.
Appraisals start with the home inspection
To determine an accurate status of the property, it's our duty to first complete a thorough inspection. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really are present and are in the shape a reasonable buyer 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 identifies any obvious amenities - or defects - that would affect the value of the property.
Next, after the inspection, we use 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 the appraiser uses information on local building costs, the cost of labor and other elements to determine how much it would cost to build a property nearly identical to the one being appraised. This value commonly sets the upper limit on what a property would sell for. It's also the least used method.
Paired Sales Analysis
Appraisers can tell you a lot about the subdivisions in which they appraise. They thoroughly understand the value of particular features to the homeowners of that area. Then, the appraiser looks up recent transactions in the vicinity and finds properties which are 'comparable' to the real estate in question. By assigning a dollar value to certain items such as square footage, additional bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we adjust the comparable properties so that they are more accurately in line with the features of subject.
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 APPRAISAL EXPERTS, LLC, we are an authority in knowing the value of real estate features in Saint Louis and Saint Louis County neighborhoods. The sales comparison approach to value is usually given the most weight when an appraisal is for a home purchase.
Valuation Using the Income Approach
A third way of valuing real estate is sometimes employed when an area has a measurable number of rental properties. In this case, the amount of revenue the property generates is taken into consideration along with other rents in the area for comparable properties to give an indicator of the current value.
Coming Up With The Final Value
Combining information from all approaches, the appraiser is then ready to document an estimated market value for the property in question. Note: While this amount is probably the strongest indication of what a property is worth, it probably will not be the final sales price. Depending on the individual situations 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.But the appraised value is often employed 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. The bottom line is, an appraiser from APPRAISAL EXPERTS, LLC will help you discover the most accurate property value, so you can make the most informed real estate decisions.