Real Estate Appraisals: A PrimerPurchasing real estate can be the largest transaction some people might ever consider. Whether it's a primary residence, a second vacation home or one of many rentals, purchasing real property is a detailed financial transaction that requires multiple people working in concert to see it through.
It's likely you are familiar with the parties taking part in the transaction. The most known face in the exchange is the real estate agent. Then, the mortgage company provides the financial capital necessary to bankroll the deal. Ensuring all details of the transaction are completed and that a clear title transfers to the buyer from the seller is the title company.
So what party is responsible for making sure the property is consistent with the purchase price? This is where you meet the appraiser. We provide an unbiased opinion of what a buyer might expect to pay - or a seller receive - for a property, where both buyer and seller are informed parties. A professional North Carolina licensed appraiser from Ann Baum Appraisal Service will ensure you as an interested party are informed.
The inspection is where an appraisal startsTo ascertain the true status of the property, it's our responsibility to first complete a thorough inspection. We must see features hands on, such as the number of bedrooms and bathrooms, the location, living areas, etc., to ensure they really exist and are in the condition a typical buyer would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is proper and illustrating the layout of the property. Most importantly, the appraiser identifies any obvious features - or defects - that would have an impact on the value of the house.
After the inspection, an appraiser employs two or three approaches when determining the value of real property: sales comparison and, in the case of a rental property, an income approach.
Cost ApproachHere, the appraiser analyzes information on local construction costs, labor rates and other factors to calculate how much it would cost to build a property comparable to the one being appraised. This value often sets the maximum on what a property would sell for. It's also the least used method.
Sales ComparisonAppraisers are intimately familiar with the neighborhoods in which they appraise. We thoroughly understand the value of particular features to the homeowners of that area. Then, the appraiser researches recent transactions in the neighborhood and finds properties which are 'comparable' to the home being appraised. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject.
Valuation Using the Income ApproachIn the case of income producing properties - rental houses for example - the appraiser may use an additional approach to value. In this case, the amount of income the real estate generates is factored in with other rents in the area for comparable properties to give an indicator of the current value.
Putting It All TogetherAnalyzing the data from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the property at hand. 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 what a property could sell for in an open market. 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. Regardless, the appraised value is often employed as a guideline for lenders who don't want to loan a buyer more money than they could recover in the event they had to sell the property again. Here's what it all boils down to: An appraiser from Ann Baum Appraisal Service will guarantee you attain the most fair and balanced property value, so you can make profitable real estate decisions.