What Are the Parts of an Appraisal?Buying a house can be the largest transaction most people might ever consider. Whether it's a primary residence, 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. Most of the parties participating are quite familiar. The most familiar face in the exchange is the real estate agent. Then, the lender provides the financial capital required to fund the deal. And the title company sees to it that all aspects of the exchange are completed and that the title is clear to pass from the seller to the purchaser. So, what party is responsible for making sure the value of the real estate is consistent with the purchase price? This is where the appraiser comes in. We provide an unbiased opinion of what a buyer might expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Island House Appraisals Inc will ensure, you as an interested party, are informed. Appraisals start with the property inspectionOur first duty at Island House Appraisals Inc is to inspect the property to ascertain its true status. We must see features hands on, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really are present and are in the shape a typical person would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is accurate and conveying the layout of the property. Most importantly, we identify any obvious amenities - or defects - that would affect the value of the house. After the inspection, an appraiser uses two or three approaches to determining the value of the property: sales comparison and, in the case of a rental property, an income approach. Replacement CostThis is where we pull information on local building costs, the cost of labor and other factors to figure out how much it would cost to replace the property being appraised. This value usually sets the upper limit on what a property would sell for. It's also the least used method. Analyzing Comparable SalesAppraisers become very familiar with the neighborhoods in which they work. They thoroughly understand the value of certain 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 home at hand. Using knowledge of the value of certain items such as square footage, additional bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we adjust the comparable properties so that they are more accurately in line with the features of subject.
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 Island House Appraisals Inc, we are experts when it comes to knowing the value of real estate features in Hobe Sound and Martin County neighborhoods. This approach to value is most often given the most weight when an appraisal is for a home exchange. Valuation Using the Income ApproachIn the case of income producing properties - rental houses for example - we may use a third approach to value. In this case, the amount of income the real estate generates is taken into consideration along with income produced by nearby properties to derive the current value. Coming Up With The Final ValueCombining information from all applicable approaches, the appraiser is then ready to put down an estimated market value for the property in question. The estimate of value at the bottom of the appraisal report is not necessarily the final sales price even though it is likely the best indication of a property's valueThere are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust an offer or listing price 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 the property is actually worth. The bottom line is, an appraiser from Island House Appraisals Inc will guarantee you discover the most accurate property value, so you can make profitable real estate decisions. |