Comprehending Appraisals

Acquiring real estate is the most important transaction many of us will ever consider. It doesn't matter if where you raise your family, a seasonal vacation home or one of many rentals, purchasing real property is an involved financial transaction that requires multiple people working in concert to see it through.

You're likely to be familiar with the parties having a role in the transaction. The real estate agent is the most familiar entity in the transaction. Then, the mortgage company provides the money required to finance the exchange. And ensuring all aspects of the transaction are completed and that a clear title passes from the seller to the buyer is the title company.

To learn more about appraising, click here to see a short video or call us today to talk about your specific property.

So, what party makes sure the property is worth the amount being paid? This is where you meet the appraiser. We provide an unbiased opinion of what a buyer could 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 Randel Appraisal Service will ensure, you as an interested party, are informed.

Appraisals start with the property inspection

To ascertain an accurate status of the property, it's our responsibility to first perform a thorough inspection. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they indeed are present 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, we identify any obvious amenities - or defects - that would have an impact on the value of the house.

Back at the office, we use two or three approaches to determining the value of the property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.

Replacement Cost

This is where we gather information on local building costs, labor rates and other elements to calculate how much it would cost to replace the property being appraised. This value often sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.

Sales Comparison

Appraisers are intimately familiar with the communities in which they appraise. They thoroughly understand the value of certain features to the people of that area. Then, the appraiser researches recent transactions in close proximity to the subject and finds properties which are 'comparable' to the subject in question. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, we add or subtract from each comparable's sales price so that they more accurately portray the features of subject property.

  • If, for example, the comparable property has an irrigation system and the subject does not, the appraiser may subtract the value of an irrigation system from the sales price of the comparable home.
  • However, if the subject has an extra half-bathroom and the comparable does not, the appraiser might add a certain amount to the comparable property.

A true estimate of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. When it comes to knowing the true worth of features of homes in Jennings and Decatur, Randel Appraisal Service is second to none. The sales comparison approach to value is typically given the most consideration when an appraisal is for a home purchase.

Valuation Using the Income Approach

A third way of valuing a property is sometimes applied when a neighborhood has a measurable number of rental properties. In this case, the amount of revenue the property generates is taken into consideration along with other rents in the area for comparable properties to determine the current value.

Reconciliation

Examining 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 at the bottom of the appraisal report is not necessarily what's being paid for the property even though it is likely the best indication of what a property is worth. Depending on the individual circumstances 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 often used 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. The bottom line is, an appraiser from Randel Appraisal Service will guarantee you discover the most accurate property value, so you can make wise real estate decisions.