Real Property Appraisals: A Primer
Purchasing real estate can be the most important transaction many people might ever encounter. Whether it's where you raise your family, a second vacation property or an investment, the purchase of real property is a complex financial transaction that requires multiple parties to see it through.
You're likely to be familiar with the parties taking part in the transaction. The most known entity in the exchange is the real estate agent. Then, the mortgage company provides the money required to fund the deal. And ensuring all details of the sale are completed and that the title is clear to transfer from the seller to the buyer is the title company.
So, what party is responsible for making sure the real estate is worth the amount being paid? In comes the appraiser. We provide an unbiased opinion of what a buyer could expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Goedker Appraisal Services will ensure, you as an interested party, are informed.
Appraisals start with the property inspection
To ascertain the true status of the property, it's our duty to first complete a thorough inspection. We must see features first hand, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they indeed are there and are in the condition a typical person would expect them to be. To ensure the stated square footage is accurate and document the layout of the home, the inspection often entails creating a sketch of the floorplan. Most importantly, the appraiser looks for any obvious amenities - or defects - that would affect the value of the property.
Following the inspection, 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.
Here, the appraiser gathers information on local building costs, the cost of labor and other factors to determine how much it would cost to construct a property comparable to the one 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 can tell you a lot about the subdivisions in which they work. They innately understand the value of specific features to the people of that area. Then, the appraiser researches recent sales in the vicinity and finds properties which are 'comparable' to the property at hand. Using knowledge of the value of 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 are more accurately in line with the features of subject.
In the end, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At Goedker Appraisal Services, we are an authority when it comes to knowing the worth of particular items in Merrifield and Crow Wing County neighborhoods. The sales comparison approach to value is usually given the most weight when an appraisal is for a home purchase.
Valuation Using the Income Approach
A third method of valuing a house is sometimes employed when an area has a measurable number of renter occupied properties. In this situation, the amount of revenue the property produces is taken into consideration along with other rents in the area for comparable properties to derive the current value.
Arriving at a Value Conclusion
Analyzing the data from all applicable approaches, the appraiser is then ready to state an estimated market value for the subject property. The estimate of value on the appraisal report is not always what's being paid for the property even though it is likely the best indication of what a property is worth. Depending on the specific 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 they could get back in case they had to sell the property again. It all comes down to this, an appraiser from Goedker Appraisal Services will guarantee you get the most fair and balanced property value, so you can make wise real estate decisions.