What Goes Into an Appraisal?
A home purchase is the biggest transaction some could ever consider. Whether it's where you raise your family, an additional vacation property or one of many rentals, purchasing real property is a complex transaction that requires multiple people working in concert to pull it all off.
The majority of the people involved are quite familiar. The real estate agent is the most known entity in the transaction. Then, the bank provides the financial capital necessary to fund the transaction. And ensuring all aspects 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 value of the real estate is consistent with the amount being paid? In comes the appraiser. We provide an unbiased opinion 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 Joseph Mier & Associates will ensure, you as an interested party, are informed.
The inspection is where an appraisal begins
Our first task at Joseph Mier & Associates is to inspect the property to ascertain its true status. We must physically view features, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they really exist and are in the shape a typical buyer would expect them to be. To ensure the stated square footage has not been misrepresented and convey the layout of the property, 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 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.
This is where the appraiser pulls information on local building costs, the cost of labor and other factors to determine how much it would cost to build a property nearly identical to the one being appraised. This figure commonly sets the maximum on what a property would sell for. It's also the least used predictor of value.
Analyzing Comparable Sales
Appraisers can tell you a lot about the communities in which they work. They thoroughly understand the value of particular features to the residents of that area. Then, the appraiser researches recent transactions in close proximity to the subject and finds properties which are 'comparable' to the property at hand. 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 property.
An opinion of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. At Joseph Mier & Associates, we are an authority when it comes to knowing the value of particular items in Hammond and Tangipahoa County neighborhoods. The sales comparison approach to value is typically given the most importance when an appraisal is for a real estate exchange.
Valuation Using the Income Approach
A third method of valuing approach to value is sometimes used when a neighborhood has a reasonable number of rental properties. In this situation, the amount of income the property yields is taken into consideration along with other rents in the area for comparable properties to determine the current value.
Putting It All Together
Analyzing the data from all approaches, the appraiser is then ready to state an estimated market value for the subject property. The estimate of value at the bottom of the appraisal report is not necessarily what's being paid for the property 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'. But the appraised value is typically employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. Here's what it all boils down to, an appraiser from Joseph Mier & Associates will help you attain the most accurate property value, so you can make wise real estate decisions.