Their home's purchase is the most serious transaction many people could ever consider. It doesn't matter if where you raise your family, an additional vacation property or a rental fixer upper, purchasing real property is a complex transaction that requires multiple people working in concert to pull it all off.
The majority of the people participating are very familiar. The most recognizable entity in the transaction is the real estate agent. Next, the bank provides the money needed to bankroll the deal. The title company ensures that all requirements of the transaction are completed and that the title is clear to pass to the buyer from the seller.
So, what party makes sure the value of the real estate is consistent with the amount being paid? 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 ACME Appraisal will ensure, you as an interested party, are informed.
Appraisals start with the inspection
To determine an accurate status of the property, it's our responsibility to first complete a thorough inspection. We must see features first hand, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they truly exist and are in the condition a typical person 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 property.
Next, after the inspection, an appraiser uses 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.
Here, we use information on local construction costs, labor rates and other factors to ascertain how much it would cost to construct a property nearly identical to the one being appraised. This value usually sets the upper limit on what a property would sell for. The cost approach is also the least used method.
Analyzing Comparable Sales
Appraisers get to know the neighborhoods in which they work. They innately understand the value of particular features to the homeowners of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the real estate being appraised. By assigning a dollar value to certain items such as fireplaces, room layout, appliance upgrades, extra bathrooms or bedrooms, or quality of construction, we adjust the comparable properties so that they more accurately match the features of subject property.
After all differences have been accounted for, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At ACME Appraisal, we are an authority when it comes to knowing the worth of particular items in Bluffton and Allen County neighborhoods. 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
In the case of income producing properties - rental houses for example - the appraiser may use an additional approach to value. In this case, the amount of income the real estate yields is taken into consideration along with other rents in the area for comparable properties to derive the current value.
Putting It All Together
Combining information from all approaches, the appraiser is then ready to put down an estimated market value for the subject property. It is important to note that while this amount is probably the most accurate indication of what a house is worth, it probably will not be the price at which the property closes. There are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust an offer or listing price up or down. But the appraised value is often used as a guideline for lenders who don't want to loan a buyer more money than they could recover in the event they had to sell the property again. At the end of the day, an appraiser from ACME Appraisal will help you get the most accurate property value, so you can make profitable real estate decisions.