What Are the Parts of an Appraisal?
A home purchase can be the most important investment most people will ever encounter. It doesn't matter if where you raise your family, an additional vacation property or an investment, purchasing real property is a complex financial transaction that requires multiple people working in concert to pull it all off.
Most of the participants are very familiar. The real estate agent is the most recognizable person in the transaction. Then, the bank provides the financial capital necessary to bankroll the deal. And ensuring all requirements of the transaction are completed and that the title is clear to transfer from the seller to the buyer is the title company.
So, who makes sure the value of the real estate is in line with the amount being paid? In comes the appraiser. We provide an unbiased estimate of what a buyer could 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 Property Valuation Group will ensure, you as an interested party, are informed.
The inspection is where an appraisal begins
Our first task at Property Valuation Group is to inspect the property to determine its true status. 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 are present and are in the shape a typical person would expect them to be. To make sure the stated size of the property is accurate and illustrate the layout of the house, the inspection often entails creating a sketch of the floorplan. Most importantly, we look for any obvious amenities - or defects - that would affect the value of the house.
Following the inspection, we use two or three approaches to determining the value of real property: paired sales analysis and, in the case of a rental property, an income approach.
This is where we gather information on local construction costs, the cost of labor and other factors to figure out how much it would cost to replace the property being appraised. This figure commonly sets the maximum on what a property would sell for. It's also the least used method.
Paired Sales Analysis
Appraisers can tell you a lot about the subdivisions in which they work. They thoroughly understand the value of particular features to the people of that area. Then, the appraiser researches recent sales in the vicinity and finds properties which are 'comparable' to the home at hand. By assigning a dollar value to certain items such as fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, we add or subtract from each comparable's sales price 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 Property Valuation Group, we are an authority in knowing the worth of particular items in Ferndale and Oakland County neighborhoods. The sales comparison approach to value is most often awarded the most importance when an appraisal is for a home sale.
Valuation Using the Income Approach
A third way of valuing a house is sometimes applied when an area has a reasonable number of renter occupied properties. In this case, the amount of income the property generates is taken into consideration along with other rents in the area for comparable properties to determine the current value.
Putting It All Together
Combining information from all applicable approaches, the appraiser is then ready to document an estimated market value for the subject property. It is important to note that while the appraised value is probably the strongest indication of what a property is worth, it may not be the price at which the property closes. It's not uncommon for prices to be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. But the appraised value is often employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. The bottom line is, an appraiser from Property Valuation Group will help you attain the most fair and balanced property value, so you can make wise real estate decisions.