What Is an Appraisal?
Acquiring a house can be the biggest investment some of us could ever make. It doesn't matter if where you raise your family, a seasonal vacation property or a rental fixer upper, purchasing real property is a complex financial transaction that requires multiple people working in concert to pull it all off.
It's likely you are familiar with the parties having a role in the transaction. The most familiar person in the transaction is the real estate agent. Then, the mortgage company provides the financial capital necessary to fund the transaction. And the title company ensures that all requirements of the sale are completed and that the title is clear to transfer from the seller to the purchaser.
So, who's responsible for making sure the value of the real estate is consistent with the amount being paid? This is where the appraiser comes in. We provide an unbiased estimate 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 Integrated Assets will ensure, you as an interested party, are informed.
Appraisals start with the property inspection
Our first responsibility at Integrated Assets is to inspect the property to determine its true status. We must actually view aspects of the property, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they indeed exist and are in the condition a reasonable person would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is proper and conveying the layout of the property. Most importantly, we look for any obvious amenities - or defects - that would affect 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 sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.
This is where we gather information on local building costs, labor rates and other elements to ascertain how much it would cost to replace the property being appraised. This figure often sets the maximum on what a property would sell for. The cost approach is also the least used method.
Appraisers get to know the neighborhoods in which they work. They innately understand the value of particular features to the people 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 at hand. By assigning a dollar value to certain items such as square footage, extra bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we add or subtract from each comparable's sales price so that they more accurately portray 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 Integrated Assets, we are an authority in knowing the worth of real estate features in Memphis and Shelby County neighborhoods. This approach to value is typically given the most weight when an appraisal is for a real estate purchase.
Valuation Using the Income Approach
A third way of valuing a house is sometimes used when a neighborhood has a reasonable number of rental properties. In this scenario, the amount of revenue the real estate produces is factored in with income produced by nearby properties to give an indicator of the current value.
Combining information from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the property at hand. The estimate of value on the appraisal report is not necessarily the final sales price even though it is likely the best indication of what a property is worth. 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 the property is actually worth. It all comes down to this, an appraiser from Integrated Assets will guarantee you discover the most accurate property value, so you can make the most informed real estate decisions.