What Goes Into an Appraisal?
A home purchase is the most important investment some of us may ever consider. Whether it's where you raise your family, an additional vacation property or an investment, the purchase of real property is a detailed transaction that requires multiple people working in concert to see it through.
Most people are familiar with the parties having a role in the transaction. The most known entity in the transaction is the real estate agent. Next, the bank provides the money necessary to fund the transaction. And ensuring all areas of the transaction are completed and that the title is clear to transfer from the seller to the purchaser is the title company.
So, who's responsible for making sure the value of the real estate is in line with the amount being paid? This is where the appraiser comes in. We provide an unbiased estimate 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 Magee Appraisal Service will ensure, you as an interested party, are informed.
Inspecting the subject property
Our first responsibility at Magee Appraisal Service is to inspect the property to determine its true status. We must see features first hand, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they truly are present and are in the condition a reasonable buyer would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is proper and conveying the layout of the property. Most importantly, the appraiser looks for any obvious features - or defects - that would affect 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: paired sales analysis and, in the case of a rental property, an income approach.
This is where we use information on local construction costs, labor rates and other elements to derive how much it would cost to replace the property 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 get to know the subdivisions in which they work. They thoroughly understand the value of certain features to the people of that area. Then, the appraiser looks up recent sales in close proximity to the subject and finds properties which are 'comparable' to the real estate being appraised. Using knowledge of the value of certain items such as square footage, extra bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we adjust the comparable properties 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 valuing features of homes in Fredrick and Frederick, Magee Appraisal Service is your local authority. This approach to value is commonly awarded the most consideration when an appraisal is for a real estate exchange.
Valuation Using the Income Approach
A third way of valuing a house is sometimes used when a neighborhood has a measurable number of renter occupied properties. In this case, the amount of income the real estate yields is factored in with other rents in the area for comparable properties to derive the current value.
The Bottom Line
Combining information from all approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. Note: While this amount is probably the strongest indication of what a house is worth, it may not be the price at which the property closes. There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust an offer or listing price up or down. But the appraised value is often employed as a guideline for lenders who don't want to loan a buyer more money than they could recover in case they had to put the property on the market again. The bottom line is, an appraiser from Magee Appraisal Service will guarantee you discover the most accurate property value, so you can make the most informed real estate decisions.