What Are the Components of an Appraisal?
Their home's purchase can be the most serious investment some of us may ever make. It doesn't matter if where you raise your family, an additional vacation property or a rental fixer upper, purchasing real property is a detailed financial transaction that requires multiple parties to make it all happen.
Most people are familiar with the parties taking part in the transaction. The real estate agent is the most familiar face in the transaction. Next, the mortgage company provides the money needed to finance the transaction. And the title company makes sure that all requirements of the transaction are completed and that the title is clear to pass to the buyer from the seller.
So, what party makes sure the property is worth the purchase price? 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 Real Estate Appraisal Services of WI, Inc. will ensure, you as an interested party, are informed.
Appraisals start with the property inspection
To ascertain the true status of the property, it's our duty to first conduct a thorough inspection. We must see features first hand, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really exist and are in the condition a reasonable buyer would expect them to be. To ensure the stated size of the property is accurate and convey the layout of the property, the inspection often entails creating a sketch of the floorplan. Most importantly, the appraiser looks for any obvious features - or defects - that would affect the value of the house.
Following the inspection, we use two or three approaches to determining the value of the property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.
Here, we analyze information on local construction costs, labor rates and other elements to derive how much it would cost to build a property nearly identical to the one being appraised. This estimate usually 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 appraise. They thoroughly understand the value of particular features to the homeowners of that area. Then, the appraiser looks up recent transactions in the area and finds properties which are 'comparable' to the real estate in question. Using knowledge of the value of certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or extra storage space, we adjust the comparable properties so that they are more accurately in line with the features of subject property.
In the end, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. When it comes to valuing features of homes in Princeton and Green Lake, Real Estate Appraisal Services of WI, Inc. is your local authority. The sales comparison approach to value is usually given the most weight when an appraisal is for a home purchase.
Valuation Using the Income Approach
A third method of valuing approach to value is sometimes applied when a neighborhood has a reasonable number of renter occupied properties. In this scenario, the amount of revenue the real estate yields is taken into consideration along with other rents in the area for comparable properties to determine the current value.
Arriving at a Value Conclusion
Analyzing the data from all 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 necessarily the final sales price even though it is likely the best indication of what a property is worth. Depending on the individual 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.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 Real Estate Appraisal Services of WI, Inc. will help you attain the most accurate property value, so you can make the most informed real estate decisions.