What Are the Components of an Appraisal?
Acquiring a house can be the most serious financial decision some will ever consider. Whether it's where you raise your family, an additional vacation property or an investment, purchasing real property is a detailed transaction that requires multiple people working in concert to pull it all off.
Practically all the participants are very familiar. The most familiar face in the exchange is the real estate agent. Then, the mortgage company provides the money necessary to bankroll the exchange. The title company sees to it that all areas of the sale are completed and that the title is clear to pass to the buyer from the seller.
So, who's responsible for making sure the value of the property 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 Ed Cline Appraisals will ensure, you as an interested party, are informed.
Appraisals begin with the property inspection
Our first duty at Ed Cline Appraisals is to inspect the property to ascertain its true status. We must actually view features, 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 property, ensuring the square footage is accurate and illustrating the layout of the property. Most importantly, we look for any obvious amenities - or defects - that would affect the value of the property.
After the inspection, an appraiser uses two or three approaches to determining the value of the property: sales comparison and, in the case of a rental property, an income approach.
This is where the appraiser uses information on local construction costs, labor rates and other factors to determine how much it would cost to construct a property similar to the one being appraised. This value usually sets the maximum on what a property would sell for. It's also the least used predictor of value.
Paired Sales Analysis
Appraisers can tell you a lot about the communities in which they appraise. They innately understand the value of certain features to the homeowners of that area. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are 'comparable' to the subject being appraised. By assigning a dollar value to certain items such as upgraded appliances, extra bathrooms, additional living area, quality of construction, lot size, 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. When it comes to putting a value on features of homes in Beaver Falls and Beaver, Ed Cline Appraisals is second to none. This approach to value is typically awarded the most importance when an appraisal is for a real estate purchase.
Valuation Using the Income Approach
A third way of valuing real estate is sometimes employed when an area has a measurable number of renter occupied properties. In this scenario, the amount of revenue the real estate produces is taken into consideration along with income produced by comparable properties to derive the current value.
Putting It All Together
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 probably will not be the price at which the property closes. 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 often employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. Here's what it all boils down to, an appraiser from Ed Cline Appraisals will guarantee you get the most fair and balanced property value, so you can make profitable real estate decisions.