What Are the Parts of an Appraisal?
Their home's purchase can be the most serious investment most people might ever consider. It doesn't matter if a main residence, an additional vacation home or one of many rentals, the purchase of 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 face in the transaction. Next, the mortgage company provides the financial capital necessary to fund the transaction. And the title company sees to it that all requirements of the exchange are completed and that a clear title passes to the buyer from the seller.
So, what party is responsible for making sure the property is worth the amount being paid? This is where the appraiser comes in. We provide an unbiased opinion of what a buyer might expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Complete Appraisal, LLC will ensure, you as an interested party, are informed.
The inspection is where an appraisal begins
Our first task at Complete Appraisal, LLC is to inspect the property to determine its true status. We must see features first hand, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they really are present and are in the shape a typical buyer would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is proper and illustrating the layout of the property. Most importantly, the appraiser looks for any obvious amenities - or defects - that would affect the value of the property.
After the inspection, 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.
Here, the appraiser uses information on local construction costs, the cost of labor and other factors to derive how much it would cost to replace the property being appraised. This estimate commonly sets the upper limit on what a property would sell for. The cost approach is also the least used method.
Appraisers get to know the communities in which they work. They innately understand the value of certain features to the people of that area. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are 'comparable' to the home at hand. By assigning a dollar value to certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or additional storage space, we adjust the comparable properties so that they more accurately portray the features of subject property.
After all differences have been accounted for, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At Complete Appraisal, LLC, we are an authority in knowing the worth of real estate features in Farmington and Hartford County neighborhoods. This approach to value is most often given the most weight when an appraisal is for a real estate sale.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - we may use an additional method of valuing a house. In this case, the amount of revenue the property yields is factored in with other rents in the area for comparable properties to derive the current value.
Putting It All Together
Combining information from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the property at hand. The estimate of value at the bottom of the appraisal report is not always the final sales price even though it is likely the best indication of a property's valueThere are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust the final price 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 they could recover in case they had to put the property on the market again. At the end of the day, an appraiser from Complete Appraisal, LLC will guarantee you discover the most accurate property value, so you can make the most informed real estate decisions.