What Goes Into an Appraisal?
Purchasing real estate is the most serious investment many will ever consider. It doesn't matter if a primary residence, an additional vacation home or a rental fixer upper, the purchase of real property is a detailed transaction that requires multiple parties to make it all happen.
Practically all the participants are quite familiar. The real estate agent is the most familiar entity in the transaction. Next, the bank provides the money needed to fund the exchange. And ensuring all areas of the transaction are completed and that the title is clear to transfer to the buyer from the seller 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 could expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from WTB Appraisal Svc., LLC will ensure, you as an interested party, are informed.
Appraisals start with the property inspection
To ascertain an accurate status of the property, it's our duty to first complete a thorough inspection. We must actually see aspects of the property, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly are there and are in the shape a typical person 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, we look for any obvious features - or defects - that would have an impact on the value of the property.
After the inspection, an appraiser uses 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 analyzes information on local building costs, labor rates and other factors to figure out how much it would cost to replace the property being appraised. This figure commonly sets the maximum 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 subdivisions in which they work. They thoroughly understand the value of certain features to the residents of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the subject being appraised. Using knowledge of the value of certain items such as upgraded appliances, extra bathrooms, additional living area, quality of construction, lot size, we add or subtract from each comparable's sales price so that they more accurately portray the features of subject.
A valid estimate of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. When it comes to valuing features of homes in Dunkirk and Calvert, WTB Appraisal Svc., LLC can't be beat. This approach to value is typically awarded the most weight 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 - we may use an additional approach to value. In this situation, the amount of revenue the property yields is taken into consideration along with income produced by neighboring properties to derive the current value.
Coming Up With The Final Value
Combining information from all approaches, the appraiser is then ready to document an estimated market value for the property at hand. 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 what a property is worth. Prices can always be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. Regardless, the appraised value is often employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. At the end of the day, an appraiser from WTB Appraisal Svc., LLC will guarantee you get the most fair and balanced property value, so you can make the most informed real estate decisions.