What Is an Appraisal?A home purchase can be the most serious financial decision most people may ever encounter. Whether it's where you raise your family, a second vacation home or an investment, purchasing real property is a complex transaction that requires multiple parties to see it through. The majority of the participants are very familiar. The real estate agent is the most recognizable entity in the transaction. Then, the mortgage company provides the financial capital needed to bankroll the transaction. And the title company makes sure that all aspects of the transaction are completed and that a clear title passes from the seller to the purchaser. So, who's responsible for making sure the property is worth the purchase price? This is where you meet the appraiser. We provide an unbiased estimate of what a buyer might expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Astute Appraisals, Inc. 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 conduct a thorough inspection. We must actually see features, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they truly exist and are in the condition a reasonable person would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is correct and illustrating the layout of the property. Most importantly, we look for any obvious amenities - or defects - that would affect the value of the property. Once the site has been inspected, an appraiser uses two or three approaches to determining the value of real property: sales comparison and, in the case of a rental property, an income approach. Cost ApproachHere, we analyze information on local construction costs, labor rates and other factors to figure out how much it would cost to build a property nearly identical to the one being appraised. This value usually sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value. Analyzing Comparable SalesAppraisers are intimately familiar with the neighborhoods in which they work. They innately understand the value of certain features to the homeowners of that area. Then, the appraiser looks up recent sales in the area and finds properties which are 'comparable' to the home at hand. 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 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. When it comes to valuing features of homes in Columbia and Howard, Astute Appraisals, Inc. can't be beat. This approach to value is usually given the most weight when an appraisal is for a home purchase. Valuation Using the Income ApproachIn the case of income producing properties - rental houses for example - we may use an additional approach to value. In this situation, the amount of revenue the real estate yields is taken into consideration along with income produced by similar 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 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 valueIt's not uncommon for prices to 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 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 Astute Appraisals, Inc. will help you discover the most accurate property value, so you can make wise real estate decisions. |