What Are the Parts of an Appraisal?
Their home's purchase is the most important financial decision many of us will ever consider. It doesn't matter if where you raise your family, an additional vacation property or an investment, the purchase of real property is a detailed transaction that requires multiple people working in concert to see it through.
Most people are familiar with the parties having a role in the transaction. The most known entity in the transaction is the real estate agent. Next, the bank provides the financial capital required to finance the deal. The title company ensures that all aspects of the transaction are completed and that a clear title transfers to the buyer from the seller.
So, what party is responsible for making sure the value of the property is consistent with the amount being paid? This is where the appraiser comes in. 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 Kenneth R. Bush Associates will ensure, you as an interested party, are informed.
Appraisals begin with the inspection
To ascertain the true status of the property, it's our responsibility to first conduct a thorough inspection. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they really exist and are in the condition a reasonable person would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is correct and illustrating the layout of the property. Most importantly, the appraiser identifies any obvious features - or defects - that would affect the value of the house.
Back at the office, an appraiser uses two or three approaches to determining the value of the property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.
This is where the appraiser analyzes information on local construction costs, labor rates and other factors to derive how much it would cost to build a property similar to the one being appraised. This figure usually sets the maximum on what a property would sell for. It's also the least used predictor of value.
Appraisers become very familiar with the communities in which they appraise. They thoroughly understand the value of specific features to the residents of that area. Then, the appraiser looks up 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 square footage, additional 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 are more accurately in line with 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 Kenneth R. Bush Associates, we are experts when it comes to knowing the value of real estate features in Cumberland and Providence County neighborhoods. The sales comparison approach to value is usually given the most importance when an appraisal is for a real estate exchange.
Valuation Using the Income Approach
A third way of valuing a property is sometimes employed when a neighborhood has a measurable number of renter occupied properties. In this scenario, the amount of income the property generates is taken into consideration along with income produced by comparable properties to give an indicator of the current value.
Arriving at a Value Conclusion
Examining the data from all applicable approaches, the appraiser is then ready to document 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 what a property is worth. 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'. 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. Here's what it all boils down to, an appraiser from Kenneth R. Bush Associates will guarantee you attain the most fair and balanced property value, so you can make wise real estate decisions.