Home Appraisals: A Primer
Their home's purchase can be the largest financial decision many of us might ever encounter. Whether it's where you raise your family, a second vacation home or an investment, purchasing real property is a detailed transaction that requires multiple people working in concert to make it all happen.
The majority of the participants are quite familiar. The most recognizable entity in the exchange is the real estate agent. Then, the mortgage company provides the financial capital required to bankroll the exchange. And ensuring all areas of the exchange are completed and that the title is clear to pass to the buyer from the seller is the title company.
So, what party makes sure the value of the property is consistent with the amount being paid? In comes 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 Floyd Appraisal Works Inc will ensure, you as an interested party, are informed.
Inspecting the subject property
Our first duty at Floyd Appraisal Works Inc is to inspect the property to ascertain its true status. We must actually view aspects of the property, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly are there and are in the condition a typical person would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is accurate 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 house.
After 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.
This is where we pull information on local construction costs, labor rates and other elements to derive how much it would cost to build a property comparable to the one being appraised. This figure commonly sets the maximum on what a property would sell for. It's also the least used method.
Appraisers get to know the communities in which they appraise. They innately understand the value of specific features to the residents of that area. Then, the appraiser looks up recent transactions in the neighborhood and finds properties which are 'comparable' to the home at hand. By assigning a dollar value to certain items such as upgraded appliances, additional bathrooms, additional living area, quality of construction, lot size, we adjust the comparable properties so that they more accurately portray the features of subject property.
A true estimate of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. At Floyd Appraisal Works Inc, we are an authority when it comes to knowing the worth of real estate features in Hohenwald and Lewis County neighborhoods. The sales comparison approach to value is usually given the most importance when an appraisal is for a home purchase.
Valuation Using the Income Approach
A third way of valuing a property is sometimes employed when a neighborhood has a reasonable number of renter occupied 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.
Examining the data from all applicable approaches, the appraiser is then ready to put down an estimated market value for the subject property. The estimate of value on the appraisal report is not necessarily what's being paid for the property even though it is likely the best indication of what a property is worth. Depending on the specific 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.Regardless, the appraised value is often used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. At the end of the day, an appraiser from Floyd Appraisal Works Inc will help you get the most accurate property value, so you can make wise real estate decisions.