What Goes Into an Appraisal?
Getting real estate can be the biggest investment most might ever make. It doesn't matter if where you raise your family, a seasonal vacation home or one of many rentals, purchasing real property is a complex transaction that requires multiple people working in concert to pull it all off.
The majority of the people participating are quite familiar. The real estate agent is the most recognizable person in the exchange. Next, the lender provides the money necessary to finance the exchange. And ensuring all aspects of the exchange are completed and that a clear title transfers to the buyer from the seller is the title company.
So, who's 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 A. M. Appraisals will ensure, you as an interested party, are informed.
The inspection is where an appraisal starts
Our first responsibility at A. M. Appraisals is to inspect the property to ascertain its true status. We must see features hands on, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly are present and are in the condition a typical person would expect them to be. To make sure the stated size of the property is accurate and describe the layout of the house, the inspection often includes creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious features - 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 building costs, the cost of labor and other elements to calculate how much it would cost to replace the property being appraised. This estimate commonly sets the upper limit on what a property would sell for. The cost approach is also the least used method.
Analyzing Comparable Sales
Appraisers become very familiar with the neighborhoods in which they appraise. They innately understand the value of certain features to the residents of that area. Then, the appraiser researches recent transactions in close proximity to the subject and finds properties which are 'comparable' to the home at hand. By assigning a dollar value to certain items such as upgraded appliances, additional bathrooms, additional living area, quality of construction, lot size, we add or subtract from each comparable's sales price so that they more accurately match 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 A. M. Appraisals, we are an authority when it comes to knowing the value of particular items in West Columbia and Lexington County neighborhoods. This approach to value is commonly awarded the most importance when an appraisal is for a home purchase.
Valuation Using the Income Approach
A third way of valuing approach to value is sometimes employed when a neighborhood has a measurable number of renter occupied properties. In this situation, the amount of income the real estate produces is taken into consideration along with income produced by neighboring properties to give an indicator of the current value.
The Bottom Line
Examining the data from all applicable approaches, the appraiser is then ready to put down an estimated market value for the property in question. The estimate of value on the appraisal report is not necessarily what's being paid for the property even though it is likely the best indication of a property's valueDepending 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 typically employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. The bottom line is, an appraiser from A. M. Appraisals will help you attain the most accurate property value, so you can make the most informed real estate decisions.
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