What Are the Components of an Appraisal?
Acquiring a home can be the most serious financial decision most of us might ever encounter. It doesn't matter if a main residence, a seasonal vacation home or a rental fixer upper, the purchase of real property is an involved financial transaction that requires multiple parties to make it all happen.
Practically all the participants are quite familiar. The real estate agent is the most known entity in the transaction. Next, the bank provides the financial capital necessary to finance the exchange. The title company ensures that all requirements of the exchange are completed and that the title is clear to pass to the buyer from the seller.
So, who's responsible for making sure the value of the real estate is in line with the purchase price? In comes the appraiser. We provide an unbiased opinion of what a buyer might expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from ASAP Appraisal Service, LLC 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 physically view features, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they indeed are there and are in the shape a typical buyer would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is correct and illustrating the layout of the property. Most importantly, we look for any obvious features - or defects - that would have an impact on the value of the property.
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.
Here, we gather information on local construction costs, labor rates and other elements to ascertain how much it would cost to construct a property similar to the one being appraised. This estimate 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 researches recent transactions in close proximity to the subject and finds properties which are 'comparable' to the home being appraised. By assigning a dollar value to certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or additional storage space, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject.
A true estimate of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. At ASAP Appraisal Service, LLC, we are experts in knowing the value of real estate features in Dallas and Dallas County neighborhoods. This approach to value is commonly awarded the most weight when an appraisal is for a real estate exchange.
Valuation Using the Income Approach
A third way of valuing a house is sometimes employed when an area has a measurable number of renter occupied properties. In this situation, the amount of revenue the property produces is taken into consideration along with other rents in the area for comparable properties to give an indicator of the current value.
Combining information from all applicable approaches, the appraiser is then ready to state an estimated market value for the property at hand. Note: While the appraised value is probably the most reliable indication of what a house is worth, it may not be the final sales price. It'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'. 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 get back in the event they had to sell the property again. It all comes down to this, an appraiser from ASAP Appraisal Service, LLC will help you attain the most accurate property value, so you can make profitable real estate decisions.