What Are the Components of an Appraisal?
A home purchase can be the most serious financial decision most people might ever make. Whether it's a main residence, a seasonal vacation home or one of many rentals, purchasing real property is a detailed transaction that requires multiple people working in concert to pull it all off.
You're likely to be familiar with the parties having a role in the transaction. The real estate agent is the most recognizable person in the transaction. Next, the mortgage company provides the money needed to bankroll the transaction. And ensuring all details of the transaction are completed and that a clear title passes from the seller to the purchaser is the title company.
So, what party makes sure the real estate is worth the amount being paid? In comes the appraiser. We provide an unbiased estimate 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 Lowman Appraiser's & Consultant's will ensure, you as an interested party, are informed.
The inspection is where an appraisal starts
Our first duty at Lowman Appraiser's & Consultant's is to inspect the property to ascertain its true status. We must actually view features, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they truly exist and are in the shape a reasonable person would expect them to be. To ensure the stated square footage is accurate and convey the layout of the property, the inspection often entails creating a sketch of the floorplan. Most importantly, we look for any obvious amenities - or defects - that would affect the value of the property.
After the inspection, we use two or three approaches to determining the value of the property: sales comparison and, in the case of a rental property, an income approach.
This is where we gather information on local construction costs, labor rates and other factors to figure out how much it would cost to replace the property being appraised. This estimate commonly sets the maximum on what a property would sell for. It's also the least used predictor of value.
Paired Sales Analysis
Appraisers become very familiar with the subdivisions in which they appraise. They thoroughly understand the value of specific features to the residents of that area. Then, the appraiser looks up recent sales in close proximity to the subject and finds properties which are 'comparable' to the property being appraised. Using knowledge of the value of certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or extra storage space, we adjust the comparable properties so that they are more accurately in line with the features of subject.
A true estimate of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. At Lowman Appraiser's & Consultant's, we are experts when it comes to knowing the worth of real estate features in Sedalia and Pettis County neighborhoods. This approach to value is usually awarded the most weight when an appraisal is for a home sale.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - we may use an additional approach to value. In this scenario, the amount of income the property generates is factored in with other rents in the area for comparable properties to give an indicator of the current value.
The Bottom Line
Combining information from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the property at hand. Note: While this amount is probably the best indication of what a house is worth, it probably will not be the final sales price. 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 typically employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. Here's what it all boils down to, an appraiser from Lowman Appraiser's & Consultant's will help you attain the most accurate property value, so you can make profitable real estate decisions.