What Are the Components of an Appraisal?
Getting a house can be the largest investment some people will ever make. It doesn't matter if a main residence, a seasonal vacation home or an investment, purchasing real property is a complex transaction that requires multiple parties to pull it all off.
You're probably familiar with the parties having a role in the transaction. The most known face in the exchange is the real estate agent. Then, the lender provides the money required to fund the deal. And ensuring all aspects of the sale are completed and that a clear title transfers from the seller to the purchaser is the title company.
So, who makes sure the real estate is worth the purchase price? This is where the appraiser comes in. 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 Graham Appraisal will ensure, you as an interested party, are informed.
Inspecting the subject property
Our first duty at Graham Appraisal 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, living areas, etc, to ensure they really are there and are in the condition a typical buyer would expect them to be. To make sure the stated square footage is accurate and convey the layout of the home, the inspection often entails creating a sketch of the floorplan. Most importantly, we identify any obvious features - or defects - that would affect the value of the property.
Once the site has been inspected, we use 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 use information on local building costs, labor rates and other factors to figure out how much it would cost to replace the property being appraised. This figure commonly sets the upper limit on what a property would sell for. It's also the least used method.
Paired Sales Analysis
Appraisers become very familiar with the subdivisions in which they appraise. They thoroughly understand the value of specific features to the residents of that area. Then, the appraiser looks up recent transactions in the vicinity and finds properties which are 'comparable' to the property 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 add or subtract from each comparable's sales price so that they more accurately match the features of subject property.
An opinion of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. When it comes to knowing the true worth of features of homes in Glasgow and Barren, Graham Appraisal is your local authority. This approach to value is usually awarded the most consideration when an appraisal is for a real estate sale.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - the appraiser may use a third way of valuing real estate. In this situation, the amount of revenue the real estate generates is taken into consideration along with income produced by nearby properties to give an indicator of the current value.
Putting It All Together
Examining the data from all approaches, the appraiser is then ready to put down an estimated market value for the property at hand. It is important to note that while this amount is probably the most accurate indication of what a property is worth, it probably will not be the price at which the property closes. Depending on the individual 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 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 Graham Appraisal will help you get the most fair and balanced property value, so you can make profitable real estate decisions.