What Are the Components of an Appraisal?
Acquiring real estate is the most significant transaction some might ever encounter. Whether it's a primary residence, a seasonal vacation home or an investment, purchasing real property is a complex transaction that requires multiple parties to pull it all off.
Most of the participants are very familiar. The most recognizable face in the transaction is the real estate agent. Then, the lender provides the money required to fund the exchange. And the title company makes sure that all aspects of the exchange are completed and that the title is clear to transfer from the seller to the buyer.
So, what party makes sure the property is worth the purchase price? 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 Race Appraisal Services, LLC will ensure, you as an interested party, are informed.
Inspecting the subject property
Our first responsibility at Race Appraisal Services, LLC is to inspect the property to ascertain its true status. We must actually see aspects of the property, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they really exist and are in the shape a reasonable person would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is correct and conveying the layout of the property. Most importantly, the appraiser identifies any obvious amenities - or defects - that would have an impact on the value of the property.
Following the inspection, we use two or three approaches to determining the value of real property: sales comparison and, in the case of a rental property, an income approach.
This is where the appraiser uses information on local building costs, the cost of labor and other elements to derive how much it would cost to construct a property comparable to the one being appraised. This value often sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.
Appraisers are intimately familiar with the communities in which they work. They thoroughly understand the value of specific features to the homeowners of that area. Then, the appraiser looks up recent sales in the vicinity and finds properties which are 'comparable' to the home in question. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, we adjust the comparable properties so that they more accurately match the features of subject.
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 Race Appraisal Services, LLC, we are experts when it comes to knowing the value of real estate features in East Longmeadow and Hampden County neighborhoods. The sales comparison approach to value is commonly given the most consideration when an appraisal is for a home sale.
Valuation Using the Income Approach
A third way of valuing real estate is sometimes applied when a neighborhood has a measurable number of rental properties. In this situation, the amount of income the real estate produces is taken into consideration along with other rents in the area for comparable properties to give an indicator of the current value.
Coming Up With The Final Value
Examining the data from all applicable approaches, the appraiser is then ready to put down an estimated market value for the subject property. The estimate of value on the appraisal report is not always what's being paid for the property even though it is likely the best indication of a property's valueThere are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust an offer or listing price up or down. Regardless, 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 Race Appraisal Services, LLC will guarantee you get the most accurate property value, so you can make wise real estate decisions.
Got a Question?
Do you have a question relating to real estate appraisals? We can help. Simply fill out the form below and we'll contact you with the answer, with no obligation to you. We guarantee your privacy.