What Are the Parts of an Appraisal?
A home purchase is the biggest investment most might ever consider. It doesn't matter if where you raise your family, a second vacation property or an investment, purchasing real property is an involved financial transaction that requires multiple people working in concert to pull it all off.
You're likely to be familiar with the parties taking part in the transaction. The most familiar entity in the exchange is the real estate agent. Next, the bank provides the money required to bankroll the deal. The title company makes sure that all aspects of the sale are completed and that a clear title transfers to the buyer from the seller.
So, who's responsible for making sure the value of the property is in line with 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 property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Daniel Todd Appraisal Services, LLC will ensure, you as an interested party, are informed.
Inspecting the subject property
Our first task at Daniel Todd Appraisal Services, LLC is to inspect the property to ascertain its true status. We must actually see aspects of the property, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they really are present and are in the condition a typical person would expect them to be. To make sure the stated square footage is accurate and illustrate the layout of the house, the inspection often includes 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 paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.
Here, we use information on local building costs, labor rates and other factors to determine how much it would cost to replace the property being appraised. This estimate usually sets the upper limit on what a property would sell for. The cost approach is also the least used method.
Analyzing Comparable Sales
Appraisers become very familiar with the neighborhoods in which they work. They thoroughly understand the value of certain features to the residents of that area. Then, the appraiser looks up recent sales in the vicinity and finds properties which are 'comparable' to the subject being appraised. By assigning a dollar value to 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.
Once all necessary adjustments have been made, 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 associating a value with features of homes in Bloomington and Monroe, Daniel Todd Appraisal Services, LLC can't be beat. The sales comparison approach to value is commonly given the most weight when an appraisal is for a real estate sale.
Valuation Using the Income Approach
A third way of valuing a property is sometimes employed when an area has a measurable number of renter occupied properties. In this situation, the amount of revenue the property produces is taken into consideration along with other rents in the area for comparable properties to derive the current value.
Putting It All Together
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 necessarily the final sales price even though it is likely the best indication of a property's valueDepending on the individual circumstances 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 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 Daniel Todd Appraisal Services, LLC will guarantee you attain the most fair and balanced property value, so you can make profitable real estate decisions.