What Are the Parts of an Appraisal?
Getting a house can be the most serious transaction most of us might ever consider. It doesn't matter if where you raise your family, a second vacation home or a rental fixer upper, purchasing real property is a detailed financial transaction that requires multiple parties to pull it all off.
It's likely you are familiar with the parties having a role in the transaction. The real estate agent is the most known entity in the transaction. Then, the mortgage company provides the financial capital required to finance the transaction. And ensuring all areas of the exchange are completed and that the title is clear to transfer from the seller to the purchaser is the title company.
So, what party is responsible for making sure the real estate is worth 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 parcel of real estate, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Legacy Appraisal Services, Inc. will ensure, you as an interested party, are informed.
Appraisals start with the property inspection
To ascertain the true status of the property, it's our responsibility to first perform a thorough inspection. We must actually see features, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they indeed 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 proper and illustrating the layout of the property. Most importantly, we look for any obvious features - or defects - that would affect the value of the property.
Back at the office, 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.
This is where we use information on local building costs, labor rates and other elements to ascertain how much it would cost to build a property nearly identical to the one being appraised. This figure often sets the upper limit on what a property would sell for. The cost approach is also the least used method.
Paired Sales Analysis
Appraisers become very familiar with 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. 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 match the features of subject.
A valid estimate 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 associating a value with features of homes in North Miami Beach and Miami-Dade, Legacy Appraisal Services, Inc. is second to none. The sales comparison approach to value is most often given the most importance when an appraisal is for a real estate sale.
Valuation Using the Income Approach
A third method of valuing approach to value is sometimes applied when an area has a measurable number of renter occupied properties. In this case, the amount of revenue the real estate generates is taken into consideration along with income produced by neighboring properties to determine the current value.
Analyzing the data from all approaches, the appraiser is then ready to document an estimated market value for the subject property. 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 valueIt's not uncommon for prices to be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. 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. Here's what it all boils down to, an appraiser from Legacy Appraisal Services, Inc. will help you get the most fair and balanced property value, so you can make wise real estate decisions.