What Are the Parts of an Appraisal?
Their home's purchase can be the biggest financial decision some may ever make. Whether it's a main residence, a second vacation property or one of many rentals, purchasing real property is a complex financial transaction that requires multiple parties to pull it all off.
It's likely you are familiar with the parties taking part in the transaction. The real estate agent is the most recognizable entity in the exchange. Then, the lender provides the money needed to fund the deal. And ensuring all areas of the sale are completed and that a clear title transfers to the buyer from the seller is the title company.
So, what party is responsible for making sure the property is worth the amount being paid? In comes the appraiser. We provide an unbiased estimate 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 Loring Associates will ensure, you as an interested party, are informed.
Appraisals begin with the property inspection
To determine an accurate status of the property, it's our duty to first conduct a thorough inspection. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, amenities, 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 accurate and illustrating the layout of the property. Most importantly, the appraiser identifies any obvious features - or defects - that would affect the value of the house.
Once the site has been inspected, an appraiser uses 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 construction costs, the cost of labor and other elements to figure out how much it would cost to construct a property similar to the one being appraised. This value often sets the maximum on what a property would sell for. The cost approach is also the least used method.
Paired Sales Analysis
Appraisers can tell you a lot about the neighborhoods in which they appraise. They innately understand the value of particular features to the residents of that area. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are 'comparable' to the subject being appraised. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, extra bathrooms or bedrooms, or quality of construction, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject property.
An opinion of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. When it comes to putting a value on features of homes in Revere and Suffolk, Loring Associates can't be beat. The sales comparison approach to value is commonly given the most importance when an appraisal is for a home purchase.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - we may use an additional approach to value. In this situation, the amount of income the property produces is factored in with other rents in the area for comparable properties to give an indicator of 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 property at hand. Note: While the appraised value is probably the most accurate indication of what a property is worth, it may not be the final sales price. 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.But the appraised value is typically employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. Here's what it all boils down to, an appraiser from Loring Associates will guarantee you get the most accurate property value, so you can make wise real estate decisions.