What Are the Components of an Appraisal?
A home purchase is the largest investment many of us may ever consider. Whether it's where you raise your family, an additional vacation home or a rental fixer upper, purchasing real property is a complex financial transaction that requires multiple parties to pull it all off.
The majority of the participants are quite familiar. The real estate agent is the most recognizable person in the transaction. Next, the lender provides the money required to fund the deal. The title company sees to it that all areas of the transaction are completed and that the title is clear to pass from the seller to the buyer.
So, who's responsible for making sure the value of the property is consistent with the purchase price? 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 Lee Pruett Appraisal Svc will ensure, you as an interested party, are informed.
Appraisals begin with the home inspection
Our first task at Lee Pruett Appraisal Svc is to inspect the property to ascertain its true status. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly are present and are in the condition a typical person would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is correct and conveying 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.
Once the site has been inspected, an appraiser uses two or three approaches to determining the value of the property: paired sales analysis and, in the case of a rental property, an income approach.
Here, we analyze information on local construction costs, the cost of labor and other factors to calculate how much it would cost to build a property similar to the one being appraised. This value commonly sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.
Analyzing Comparable Sales
Appraisers get to know the neighborhoods in which they appraise. They innately understand the value of specific features to the people of that area. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are 'comparable' to the real estate in question. 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 more accurately portray the features of subject.
A valid estimate of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. At Lee Pruett Appraisal Svc, we are experts when it comes to knowing the worth of particular items in Greenwood and Leflore County neighborhoods. The sales comparison approach to value is typically awarded the most importance when an appraisal is for a home purchase.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - we may use an additional approach to value. In this scenario, the amount of income the property produces is taken into consideration along with other rents in the area for comparable properties to determine the current value.
The Bottom Line
Examining the data from all approaches, the appraiser is then ready to put down an estimated market value for the subject property. It is important to note that while the appraised value is probably the best indication of what a house is worth, it may not be the price at which the property closes. Depending on the specific 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.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 case they had to sell the property again. It all comes down to this, an appraiser from Lee Pruett Appraisal Svc will help you get the most fair and balanced property value, so you can make wise real estate decisions.