What Goes Into an Appraisal?
Their home's purchase can be the biggest investment most may ever consider. It doesn't matter if where you raise your family, an additional vacation property or one of many rentals, the purchase of real property is an involved transaction that requires multiple parties to make it all happen.
You're probably familiar with the parties having a role in the transaction. The most familiar face in the transaction is the real estate agent. Next, the bank provides the money necessary to fund the deal. And ensuring all aspects of the transaction are completed and that a clear title transfers to the buyer from the seller is the title company.
So, what party is responsible for making sure the value of the property is in line with the purchase price? In comes the appraiser. We provide an unbiased estimate 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 Garrison Appraisal will ensure, you as an interested party, are informed.
The inspection is where an appraisal starts
Our first task at Garrison Appraisal is to inspect the property to determine its true status. We must actually see features, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly are there and are in the shape a reasonable buyer would expect them to be. To make sure the stated square footage has not been misrepresented and convey the layout of the home, the inspection often includes creating a sketch of the floorplan. Most importantly, we identify any obvious features - or defects - that would affect the value of the house.
Once the site has been inspected, we use 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, the appraiser uses information on local construction costs, the cost of labor and other factors to derive how much it would cost to construct a property comparable to the one being appraised. This figure commonly sets the upper limit 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 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 close proximity to the subject and finds properties which are 'comparable' to the property in question. By assigning a dollar value to certain items such as fireplaces, room layout, appliance upgrades, extra bathrooms or bedrooms, or quality of construction, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject.
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 associating a value with features of homes in Raleigh and Wake, Garrison Appraisal can't be beat. The sales comparison 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 - the appraiser may use a third approach to value. In this scenario, the amount of income the real estate produces is factored in with income produced by neighboring properties to determine the current value.
The Bottom Line
Analyzing the data from all approaches, the appraiser is then ready to stipulate an estimated market value for the property at hand. Note: While the appraised value is probably the most accurate 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'. But 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 case they had to put the property on the market again. It all comes down to this, an appraiser from Garrison Appraisal will help you attain the most fair and balanced property value, so you can make the most informed real estate decisions.