Real Estate Appraisals: A Primer
Acquiring a home is the biggest transaction most people will ever make. It doesn't matter if where you raise your family, an additional vacation property or an investment, the purchase of real property is an involved financial transaction that requires multiple parties to make it all happen.
Most people are familiar with the parties having a role in the transaction. The real estate agent is the most recognizable face in the exchange. Then, the mortgage company provides the money necessary to finance the transaction. And ensuring all details of the exchange are completed and that the title is clear to transfer to the buyer from the seller is the title company.
So, who's responsible for making sure the real estate is worth the amount being paid? This is where you meet 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 Teamwork Appraisal Service will ensure, you as an interested party, are informed.
The inspection is where an appraisal begins
Our first duty at Teamwork Appraisal Service is to inspect the property to ascertain its true status. We must physically view aspects of the property, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they indeed exist and are in the shape a typical person would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is correct and conveying the layout of the property. Most importantly, we look for any obvious features - or defects - that would have an impact on the value of the house.
Once the site has been inspected, we use two or three approaches to determining the value of real property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.
This is where we pull information on local construction costs, labor rates and other factors to derive how much it would cost to replace the property being appraised. This figure usually sets the upper limit on what a property would sell for. It's also the least used method.
Analyzing Comparable Sales
Appraisers are intimately familiar with the communities in which they work. They innately understand the value of certain features to the residents of that area. Then, the appraiser looks up recent sales in close proximity to the subject and finds properties which are 'comparable' to the home in question. By assigning a dollar value to 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 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. When it comes to putting a value on features of homes in Melbourne and Brevard, Teamwork Appraisal Service is your local authority. The sales comparison approach to value is most often awarded the most weight when an appraisal is for a real estate purchase.
Valuation Using the Income Approach
A third method of valuing approach to value is sometimes employed when an area has a reasonable number of renter occupied properties. In this situation, the amount of revenue the property yields is taken into consideration along with income produced by nearby properties to derive the current value.
The Bottom Line
Combining information from all approaches, the appraiser is then ready to document an estimated market value for the subject property. The estimate of value on the appraisal report is not always what's being paid for the property even though it is likely the best indication of what a property is worth. It's not uncommon for prices to be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. Regardless, the appraised value is typically used as a guideline for lenders who don't want to loan a buyer more money than they could get back in the event they had to put the property on the market again. It all comes down to this, an appraiser from Teamwork Appraisal Service will guarantee you discover the most fair and balanced property value, so you can make wise real estate decisions.