What Goes Into an Appraisal?
A home purchase is the largest transaction most could ever encounter. Whether it's where you raise your family, a second vacation property or an investment, the purchase of real property is an involved transaction that requires multiple people working in concert to see it through.
It's likely you are familiar with the parties having a role in the transaction. The most familiar face in the exchange is the real estate agent. Next, the bank provides the financial capital required to bankroll the transaction. And ensuring all areas of the transaction are completed and that the title is clear to pass from the seller to the purchaser is the title company.
So, what party is responsible for making sure the real estate is worth the purchase price? This is where you meet the appraiser. We provide an unbiased opinion 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 Advantage Appraisal Services, LLC 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 perform a thorough inspection. We must see features first hand, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they indeed are there and are in the condition a typical person would expect them to be. To make sure the stated square footage is accurate and convey the layout of the home, the inspection often requires creating a sketch of the floorplan. Most importantly, the appraiser looks for any obvious amenities - or defects - that would have an impact on the value of the property.
Once the site has been inspected, we use two or three approaches to determining the value of the property: paired sales analysis and, in the case of a rental property, an income approach.
This is where we pull information on local building costs, the cost of labor and other factors to determine how much it would cost to replace the property being appraised. This estimate usually sets the maximum on what a property would sell for. It's also the least used method.
Analyzing Comparable Sales
Appraisers can tell you a lot about the neighborhoods in which they work. They innately understand the value of specific features to the residents of that area. Then, the appraiser researches recent sales in the area and finds properties which are 'comparable' to the subject being appraised. 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 portray the features of subject property.
An opinion of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. At Advantage Appraisal Services, LLC, we are an authority when it comes to knowing the value of particular items in Blackfoot and Bingham County neighborhoods. This approach to value is commonly given the most consideration when an appraisal is for a home purchase.
Valuation Using the Income Approach
A third method of valuing a property is sometimes used when a neighborhood has a reasonable number of rental properties. In this scenario, the amount of revenue the real estate yields is factored in 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 stipulate an estimated market value for the subject property. The estimate of value at the bottom of 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. Prices can always be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. But the appraised value is typically used as a guideline for lenders who don't want to loan a buyer more money than they could get back in the event they had to sell the property again. It all comes down to this, an appraiser from Advantage Appraisal Services, LLC will guarantee you discover the most fair and balanced property value, so you can make the most informed real estate decisions.