Home Appraisals: A Primer
Their home's purchase is the largest transaction some of us will ever encounter. Whether it's a primary residence, a second vacation home or one of many rentals, the purchase of real property is a detailed transaction that requires multiple parties to pull it all off.
You're likely to be familiar with the parties having a role in the transaction. The real estate agent is the most familiar entity in the transaction. Next, the lender provides the money necessary to finance the exchange. And the title company sees to it that all requirements of the sale are completed and that the title is clear to transfer to the buyer from the seller.
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 estimate 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 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 responsibility to first conduct a thorough inspection. We must physically view aspects of the property, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they truly exist and are in the shape a typical person would expect them to be. To make sure the stated square footage has not been misrepresented and describe the layout of the house, the inspection often includes creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious amenities - or defects - that would have an impact on the value of the property.
Next, after the inspection, we use 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 use information on local building costs, labor rates and other elements to figure out how much it would cost to build a property comparable to the one being appraised. This figure often sets the maximum on what a property would sell for. It's also the least used method.
Appraisers can tell you a lot about the neighborhoods in which they work. They innately understand the value of specific features to the homeowners of that area. Then, the appraiser looks up recent sales in close proximity to the subject and finds properties which are 'comparable' to the real estate 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 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. When it comes to knowing the true worth of features of homes in Memphis and Shelby, Integrated Assets is your local authority. This approach to value is typically given the most consideration when an appraisal is for a home purchase.
Valuation Using the Income Approach
A third way of valuing a house is sometimes used when a neighborhood has a measurable number of rental properties. In this situation, the amount of income the property produces is factored in with income produced by neighboring properties to determine the current value.
Arriving at a Value Conclusion
Examining the data from all approaches, the appraiser is then ready to put down an estimated market value for the property in question. Note: While this amount is probably the strongest indication of what a house is worth, it may not be the final sales price. Depending on the specific situations 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.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 recover in the event they had to put the property on the market again. The bottom line is, an appraiser from Integrated Assets will guarantee you discover the most accurate property value, so you can make the most informed real estate decisions.