Buying real estate is the most important investment most people might ever make. It doesn't matter if where you raise your family, a seasonal vacation property or an investment, the purchase of real property is a complex financial transaction that requires multiple parties to pull it all off.
Most people are familiar with the parties taking part in the transaction. The most recognizable entity in the transaction is the real estate agent. Then, the mortgage company provides the money necessary to fund the exchange. And ensuring all areas of the sale are completed and that the title is clear to transfer to the buyer from the seller is the title company.
So, who makes sure the value of the real estate is consistent with 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 Magee Appraisal Service will ensure, you as an interested party, are informed.
Appraisals begin with the inspection
To determine the true status of the property, it's our responsibility to first perform a thorough inspection. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they really exist and are in the shape a reasonable buyer would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is accurate and illustrating the layout of the property. Most importantly, we identify any obvious amenities - 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 paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.
Here, we gather information on local construction costs, the cost of labor and other elements to ascertain how much it would cost to build a property comparable 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 predictor of value.
Analyzing Comparable Sales
Appraisers can tell you a lot about the communities in which they appraise. They innately understand the value of specific features to the homeowners of that area. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are 'comparable' to the property at hand. 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 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 Magee Appraisal Service, we are experts in knowing the worth of particular items in Fredrick and Frederick County neighborhoods. The sales comparison approach to value is most often given the most consideration when an appraisal is for a real estate purchase.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - the appraiser may use an additional method of valuing a house. In this case, the amount of income the real estate generates is taken into consideration along with income produced by neighboring properties to give an indicator of the current value.
Putting It All Together
Combining information from all applicable approaches, the appraiser is then ready to put down an estimated market value for the property in question. It is important to note that while the appraised value is probably the most reliable indication of what a house is worth, it probably will 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'. Regardless, the appraised value is often used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. The bottom line is, an appraiser from Magee Appraisal Service will help you get the most accurate property value, so you can make profitable real estate decisions.