What Are the Parts of an Appraisal?
Purchasing a house is the most significant transaction some people might ever encounter. Whether it's a primary residence, a seasonal vacation home or a rental fixer upper, purchasing real property is a complex financial transaction that requires multiple people working in concert to make it all happen.
You're probably familiar with the parties having a role in the transaction. The real estate agent is the most known entity in the transaction. Next, the bank provides the money required to fund the deal. The title company makes sure that all details of the transaction are completed and that a clear title transfers from the seller to the purchaser.
So, what party is responsible for making sure the value of the real estate is consistent with the purchase price? In comes 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 Lundquist Appraisals & Real Estate Services will ensure, you as an interested party, are informed.
The inspection is where an appraisal starts
Our first responsibility at Lundquist Appraisals & Real Estate Services is to inspect the property to determine its true status. We must actually view aspects of the property, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really are present and are in the shape a typical person would expect them to be. To make sure the stated size of the property has not been misrepresented and document the layout of the property, the inspection often includes creating a sketch of the floorplan. Most importantly, the appraiser looks for any obvious amenities - or defects - that would have an impact on the value of the property.
Once the site has been inspected, an appraiser uses two or three approaches to determining the value of the property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.
This is where we gather information on local construction costs, labor rates and other factors to ascertain how much it would cost to build a property similar to the one being appraised. This figure often sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.
Analyzing Comparable Sales
Appraisers are intimately familiar with the neighborhoods in which they work. They thoroughly understand the value of certain features to the people of that area. Then, the appraiser researches recent transactions in close proximity to the subject and finds properties which are 'comparable' to the home being appraised. 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 more accurately match the features of subject.
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 associating a value with features of homes in Wabash and Wabash, Lundquist Appraisals & Real Estate Services is second to none. The sales comparison approach to value is commonly awarded the most consideration when an appraisal is for a real estate exchange.
Valuation Using the Income Approach
A third method of valuing a house is sometimes applied when an area has a measurable number of rental properties. In this scenario, the amount of revenue the property produces is factored in with income produced by similar 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. Prices can always be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. But 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 Lundquist Appraisals & Real Estate Services will help you attain the most fair and balanced property value, so you can make profitable real estate decisions.