A home purchase is the most significant transaction most of us might ever encounter. It doesn't matter if where you raise your family, a seasonal vacation property or an investment, the purchase of real property is a complex financial transaction that requires multiple people working in concert to see it through.
You're probably familiar with the parties taking part in the transaction. The most recognizable face in the transaction is the real estate agent. Next, the lender provides the money needed to fund the deal. And ensuring all aspects of the transaction are completed and that the title is clear to transfer from the seller to the purchaser is the title company.
So, who makes sure the value of the real estate is consistent with the purchase price? This is where you meet the appraiser. We provide an unbiased opinion of what a buyer might 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 Floyd Appraisal Works will ensure, you as an interested party, are informed.
Appraisals start with the home inspection
Our first duty at Floyd Appraisal Works 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 indeed exist and are in the condition a reasonable buyer would expect them to be. To ensure the stated square footage is accurate and describe the layout of the house, 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 property.
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.
This is where the appraiser analyzes information on local building costs, labor rates and other elements to figure out how much it would cost to replace the property being appraised. This value usually sets the maximum on what a property would sell for. It's also the least used method.
Paired Sales Analysis
Appraisers get to know the neighborhoods in which they work. They thoroughly understand the value of certain features to the people of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the property in question. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, we adjust the comparable properties so that they more accurately portray the features of subject property.
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 knowing the true value of features of homes in Hohenwald and Lewis, Floyd Appraisal Works is your local authority. This approach to value is usually awarded the most importance when an appraisal is for a home sale.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - the appraiser may use an additional way of valuing real estate. In this situation, the amount of revenue the property yields is factored in with other rents in the area for comparable properties to determine the current value.
Arriving at a Value Conclusion
Combining information from all approaches, the appraiser is then ready to put down an estimated market value for the property at hand. The estimate of value at the bottom of the appraisal report is not necessarily what's being paid for the property even though it is likely the best indication of a property's valueDepending 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 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 Floyd Appraisal Works will help you discover the most fair and balanced property value, so you can make profitable real estate decisions.