Home Appraisals: A Primer
A home purchase is the most significant transaction some of us could ever encounter. Whether it's where you raise your family, a seasonal vacation property or one of many rentals, purchasing real property is a complex financial transaction that requires multiple people working in concert to see it through.
The majority of the participants are quite familiar. The real estate agent is the most familiar entity in the transaction. Then, the bank provides the money needed to fund the exchange. And the title company ensures that all aspects of the transaction are completed and that the title is clear to pass to the buyer from the seller.
So, what party is responsible for making sure the value of the real estate is in line with 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 Childers Appraisals, LLC will ensure, you as an interested party, are informed.
The inspection is where an appraisal starts
To determine an accurate status of the property, it's our duty to first perform a thorough inspection. We must actually see features, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they indeed are there and are in the shape a typical person would expect them to be. The inspection often includes a sketch of the property, 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 have an impact on the value of the house.
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 we use information on local building costs, the cost of labor and other factors to determine how much it would cost to replace the property being appraised. This value often sets the maximum on what a property would sell for. The cost approach is also the least used method.
Paired Sales Analysis
Appraisers get to know the subdivisions in which they work. They thoroughly understand the value of certain features to the residents of that area. Then, the appraiser researches recent transactions in the area and finds properties which are 'comparable' to the subject in question. Using knowledge of the value of 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.
An opinion of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. When it comes to putting a value on features of homes in Crandon and Forest, Childers Appraisals, LLC is your local authority. This approach to value is usually awarded the most consideration when an appraisal is for a home exchange.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - the appraiser may use a third approach to value. In this situation, the amount of income the property generates is factored in with income produced by comparable properties to derive the current value.
Examining the data from all applicable approaches, the appraiser is then ready to state an estimated market value for the property in question. It is important to note that while the appraised value is probably the most reliable indication of what a property is worth, it may not be the final sales price. Depending 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.But the appraised value is typically used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. At the end of the day, an appraiser from Childers Appraisals, LLC will guarantee you discover the most accurate property value, so you can make the most informed real estate decisions.