What Are the Components of an Appraisal?
Their home's purchase can be the largest transaction most may ever make. It doesn't matter if where you raise your family, an additional vacation property or one of many rentals, purchasing real property is a complex financial transaction that requires multiple parties to see it through.
It's likely you are familiar with the parties having a role in the transaction. The most familiar face in the transaction is the real estate agent. Then, the mortgage company provides the financial capital needed to fund the deal. And ensuring all areas of the sale are completed and that a clear title passes from the seller to the purchaser is the title company.
So, what party is 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 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 Mike Noble Appraisals will ensure, you as an interested party, are informed.
The inspection is where an appraisal starts
Our first task at Mike Noble Appraisals is to inspect the property to ascertain its true status. We must see features hands on, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly 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 affect the value of the house.
Following the inspection, an appraiser uses two or three approaches to determining the value of real property: paired sales analysis and, in the case of a rental property, an income approach.
Here, we use information on local building costs, labor rates and other elements to ascertain how much it would cost to replace the property being appraised. This value usually sets the maximum on what a property would sell for. The cost approach is also the least used method.
Paired Sales Analysis
Appraisers can tell you a lot about the communities in which they appraise. They innately understand the value of particular features to the homeowners of that area. Then, the appraiser looks up recent transactions in the area and finds properties which are 'comparable' to the real estate in question. By assigning a dollar value to certain items such as fireplaces, room layout, appliance upgrades, additional 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 property.
In the end, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At Mike Noble Appraisals, we are experts in knowing the value of real estate features in Montgomery and Elmore County neighborhoods. This approach to value is typically awarded the most importance when an appraisal is for a real estate purchase.
Valuation Using the Income Approach
A third method of valuing a property is sometimes used when a neighborhood has a measurable number of rental properties. In this situation, the amount of income the property yields is taken into consideration along with other rents in the area for comparable properties to determine the current value.
The Bottom Line
Analyzing the data from all applicable approaches, the appraiser is then ready to state an estimated market value for the subject property. Note: While this amount is probably the most accurate indication of what a property is worth, it may not be the final sales price. Depending on the individual situations of the buyer or seller, their level of urgency or a buyer's desire for that exact property, the closing price of a home can always be driven up or down.But the appraised value is typically used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. It all comes down to this, an appraiser from Mike Noble Appraisals will guarantee you attain the most accurate property value, so you can make profitable real estate decisions.