What Is an Appraisal?
A home purchase is the most significant investment some people might ever encounter. Whether it's where you raise your family, a second vacation property or one of many rentals, purchasing real property is a complex transaction that requires multiple people working in concert to see it through.
Most of the people participating are quite familiar. The real estate agent is the most known face in the transaction. Then, the lender provides the money necessary to finance the transaction. And ensuring all aspects of the transaction are completed and that a clear title passes from the seller to the purchaser is the title company.
So, who's responsible for making sure the value of the real estate is consistent with the purchase price? In comes the appraiser. We provide an unbiased estimate 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 Integrated Assets will ensure, you as an interested party, are informed.
Inspecting the subject property
To ascertain an accurate status of the property, it's our duty to first conduct 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 indeed are there and are in the condition 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, we look for any obvious features - or defects - that would have an impact on the value of the house.
After the inspection, an appraiser uses 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.
Here, we pull information on local construction costs, labor rates and other factors to ascertain how much it would cost to build a property nearly identical to the one being appraised. This estimate usually sets the upper limit on what a property would sell for. The cost approach is also the least used predictor of value.
Analyzing Comparable Sales
Appraisers are intimately familiar with the subdivisions in which they work. They innately understand the value of specific features to the people of that area. Then, the appraiser researches recent sales 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, extra bathrooms or bedrooms, or quality of construction, we adjust the comparable properties so that they more accurately portray the features of subject.
Once all necessary adjustments have been made, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At Integrated Assets, we are an authority in knowing the value of real estate features in Memphis and Shelby County neighborhoods. The sales comparison approach to value is most often awarded the most consideration 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 method of valuing a house. In this case, the amount of income the property produces is taken into consideration along with income produced by neighboring properties to give an indicator of the current value.
Putting It All Together
Examining the data from all applicable approaches, the appraiser is then ready to state an estimated market value for the property at hand. The estimate of value at the bottom of 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. Depending on the individual 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 get back in case they had to put the property on the market again. Here's what it all boils down to, an appraiser from Integrated Assets will help you discover the most fair and balanced property value, so you can make the most informed real estate decisions.