What Are the Parts of an Appraisal?
Their home's purchase can be the most important transaction some people might ever consider. Whether it's a main residence, a second vacation property or a rental fixer upper, the purchase of real property is a complex transaction that requires multiple people working in concert to make it all happen.
You're likely to be familiar with the parties having a role in the transaction. The real estate agent is the most recognizable face in the exchange. Next, the bank provides the financial capital required to bankroll the deal. And ensuring all details of the sale are completed and that a clear title transfers from the seller to the buyer is the title company.
So, who makes sure the real estate is worth the amount being paid? In comes the appraiser. We provide an unbiased opinion 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 Catawba Valley Appraisal will ensure, you as an interested party, are informed.
Appraisals begin with the inspection
To determine the true status of the property, it's our duty to first complete a thorough inspection. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really exist and are in the shape a reasonable buyer would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is proper 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 house.
Back at the office, we use two or three approaches to determining the value of the property: sales comparison and, in the case of a rental property, an income approach.
Here, we gather information on local building costs, the cost of labor and other factors to determine how much it would cost to replace the property being appraised. This value often sets the maximum on what a property would sell for. It's also the least used method.
Appraisers are intimately familiar with the communities in which they appraise. They thoroughly understand the value of specific features to the residents of that area. Then, the appraiser looks up recent transactions in the area and finds properties which are 'comparable' to the property 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 adjust the comparable properties 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. At Catawba Valley Appraisal, we are experts in knowing the worth of particular items in your area. This approach to value is typically given the most importance when an appraisal is for a real estate exchange.
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 property produces is factored in with other rents in the area for comparable properties to derive the current value.
The Bottom Line
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 strongest indication of what a house is worth, it may not be the final sales price. There are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust the final price up or down. But the appraised value is often used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. It all comes down to this, an appraiser from Catawba Valley Appraisal will help you attain the most fair and balanced property value, so you can make profitable real estate decisions.