What Goes Into an Appraisal?
Buying real estate can be the largest financial decision many could ever encounter. Whether it's a main residence, an additional vacation property or a rental fixer upper, purchasing real property is a complex financial transaction that requires multiple parties to see it through.
Most of the people involved are very familiar. The real estate agent is the most familiar entity in the exchange. Then, the lender provides the financial capital necessary to bankroll the exchange. And the title company makes sure that all areas of the sale are completed and that the title is clear to pass from the seller to the buyer.
So, who's responsible for making sure the real estate is worth the amount being paid? In comes the appraiser. 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
To ascertain an accurate status of the property, it's our responsibility to first conduct a thorough inspection. We must physically 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. 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 property.
Following the inspection, an appraiser uses two or three approaches to determining the value of the property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.
Here, we gather information on local building costs, the cost of labor and other factors to ascertain how much it would cost to construct a property nearly identical to the one being appraised. This figure usually sets the maximum on what a property would sell for. The cost approach is also the least used method.
Paired Sales Analysis
Appraisers are intimately familiar with the neighborhoods in which they appraise. They thoroughly understand the value of specific features to the homeowners of that area. Then, the appraiser researches recent transactions in the neighborhood and finds properties which are 'comparable' to the property 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 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. At Race Appraisal Services, LLC, we are an authority in knowing the value of real estate features in East Longmeadow and Hampden County neighborhoods. This approach to value is typically given the most weight when an appraisal is for a real estate purchase.
Valuation Using the Income Approach
A third method of valuing a house is sometimes used when an area has a measurable number of renter occupied properties. In this case, the amount of income the real estate generates is taken into consideration along with income produced by neighboring properties to derive the current value.
Putting It All Together
Combining information from all approaches, the appraiser is then ready to put down an estimated market value for the property in question. Note: While the appraised value is probably the most accurate indication of what a property is worth, it may not be the final sales price. 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 typically employed as a guideline for lenders who don't want to loan a buyer more money than they could recover in case 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 get the most fair and balanced property value, so you can make the most informed real estate decisions.
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