Decoding the Appraisal Process
Their home's purchase is the most serious investment most of us will ever encounter. Whether it's where you raise your family, an additional vacation home or an investment, the purchase of real property is an involved financial transaction that requires multiple people working in concert to make it all happen.
The majority of the participants are quite familiar. The most known face in the exchange is the real estate agent. Next, the lender provides the financial capital needed to fund the exchange. And ensuring all details of the exchange are completed and that a clear title passes to the buyer from the seller is the title company.
So, what party makes sure the value of the property is in line with the amount being paid? This is where the appraiser comes in. 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 Race Appraisal Services, LLC will ensure, you as an interested party, are informed.
Inspecting the subject property
Our first task at Race Appraisal Services, LLC is to inspect the property to ascertain its true status. We must see features hands on, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed are present and are in the condition a reasonable buyer would expect them to be. To make sure the stated square footage has not been misrepresented and illustrate the layout of the property, the inspection often requires creating a sketch of the floorplan. Most importantly, the appraiser looks for any obvious features - or defects - that would have an impact on the value of the property.
Following the inspection, an appraiser uses two or three approaches to determining the value of real property: paired sales analysis and, in the case of a rental property, an income approach.
This is where we use information on local building costs, the cost of labor and other elements to determine how much it would cost to replace the property being appraised. This value usually sets the maximum on what a property would sell for. The cost approach is also the least used method.
Appraisers can tell you a lot about the communities in which they work. They thoroughly understand the value of particular features to the people of that area. Then, the appraiser researches recent transactions in the neighborhood and finds properties which are 'comparable' to the home at hand. Using knowledge of the value of certain items such as upgraded appliances, extra bathrooms, additional living area, quality of construction, lot size, we adjust the comparable properties so that they are more accurately in line with the features of subject property.
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 knowing the true value of features of homes in East Longmeadow and Hampden, Race Appraisal Services, LLC is your local authority. The sales comparison approach to value is usually awarded the most consideration when an appraisal is for a real estate purchase.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - the appraiser may use a third way of valuing real estate. In this case, the amount of income the property yields is taken into consideration along with other rents in the area for comparable properties to determine the current value.
Arriving at a Value Conclusion
Analyzing the data from all applicable approaches, the appraiser is then ready to put down an estimated market value for the subject property. The estimate of value on the appraisal report is not necessarily the final sales price even though it is likely the best indication of a property's valueDepending 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 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. At the end of the day, an appraiser from Race Appraisal Services, LLC will help you discover the most fair and balanced property value, so you can make the most informed real estate decisions.
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