Real Property Appraisals: A Primer
Their home's purchase can be the largest transaction many might ever make. It doesn't matter if where you raise your family, a seasonal vacation property or one of many rentals, purchasing real property is a complex financial transaction that requires multiple people working in concert to see it through.
Most of the people participating are very familiar. The real estate agent is the most known entity in the exchange. Next, the mortgage company provides the money required to fund the transaction. And ensuring all details of the sale are completed and that a clear title transfers from the seller to the purchaser is the title company.
So, what party makes sure the property is worth the purchase price? In comes the appraiser. We provide an unbiased estimate 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 Berry REALTORS will ensure, you as an interested party, are informed.
The inspection is where an appraisal begins
To ascertain the true status of the property, it's our duty to first complete a thorough inspection. We must see features first hand, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they really are there and are in the shape a typical buyer would expect them to be. To ensure the stated square footage is accurate and illustrate the layout of the property, the inspection often includes creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious amenities - or defects - that would have an impact on the value of the house.
Following the inspection, we use two or three approaches to determining the value of real property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.
Here, we gather information on local construction costs, labor rates and other elements to determine how much it would cost to replace the property being appraised. This value often sets the maximum on what a property would sell for. It's also the least used predictor of value.
Appraisers get to know the subdivisions in which they appraise. They innately understand the value of particular features to the people of that area. Then, the appraiser researches recent sales in the vicinity and finds properties which are 'comparable' to the property in question. By assigning a dollar value to certain items such as upgraded appliances, extra bathrooms, additional living area, quality of construction, lot size, we adjust the comparable properties so that they more accurately portray the features of subject.
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 knowing the true worth of features of homes in Kansas City and Jackson, Berry REALTORS can't be beat. The sales comparison approach to value is typically awarded the most weight when an appraisal is for a home sale.
Valuation Using the Income Approach
A third method of valuing a house is sometimes used when a neighborhood has a reasonable number of renter occupied properties. In this case, the amount of revenue the property generates is taken into consideration along with income produced by similar properties to give an indicator of the current value.
Combining information from all approaches, the appraiser is then ready to state an estimated market value for the property in question. The estimate of value on the appraisal report is not always the final sales price 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 they could get back in case they had to put the property on the market again. At the end of the day, an appraiser from Berry REALTORS will help you attain the most accurate property value, so you can make the most informed real estate decisions.