What Goes Into an Appraisal?
Getting real estate is the most serious financial decision some might ever make. Whether it's where you raise your family, a seasonal vacation property or a rental fixer upper, the purchase of real property is a complex transaction that requires multiple people working in concert to pull it all off.
The majority of the participants are very familiar. The most recognizable entity in the transaction is the real estate agent. Next, the bank provides the financial capital necessary to bankroll the transaction. And ensuring all aspects of the transaction are completed and that the title is clear to pass to the buyer from the seller is the title company.
So, who makes sure the value of the property is consistent with the purchase price? 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 Race Appraisal Services, LLC will ensure, you as an interested party, are informed.
The inspection is where an appraisal begins
Our first duty at Race Appraisal Services, LLC is to inspect the property to ascertain its true status. We must physically see features, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they really exist and are in the shape a typical person would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is accurate and illustrating the layout of the property. Most importantly, the appraiser identifies any obvious amenities - or defects - that would have an impact on the value of the property.
Back at the office, we use two or three approaches to determining the value of the property: paired sales analysis and, in the case of a rental property, an income approach.
Here, we use information on local building costs, labor rates and other elements to ascertain how much it would cost to construct a property nearly identical to the one being appraised. This figure often sets the maximum on what a property would sell for. It's also the least used method.
Paired Sales Analysis
Appraisers are intimately familiar with the communities in which they work. They innately understand the value of certain features to the residents of that area. Then, the appraiser researches recent transactions in the neighborhood and finds properties which are 'comparable' to the real estate being appraised. 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 more accurately portray the features of subject property.
After all differences have been accounted for, 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 East Longmeadow and Hampden, Race Appraisal Services, LLC can't be beat. The sales comparison approach to value is most often given the most weight when an appraisal is for a real estate sale.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - the appraiser may use a third approach to value. In this case, the amount of revenue the real estate produces is factored in with income produced by neighboring properties to determine the current value.
Combining information from all applicable approaches, the appraiser is then ready to document an estimated market value for the property at hand. It is important to note that while this amount is probably the most reliable indication of what a house is worth, it may not be the price at which the property closes. Prices can always be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. Regardless, the appraised value is often used as a guideline for lenders who don't want to loan a buyer more money than they could get back in the event they had to put the property on the market again. It all comes down to this, an appraiser from Race Appraisal Services, LLC will guarantee you discover the most fair and balanced property value, so you can make the most informed real estate decisions.
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