What Are the Parts of an Appraisal?
Purchasing a house can be the biggest financial decision most will ever consider. It doesn't matter if where you raise your family, a second vacation property or an investment, purchasing real property is a detailed transaction that requires multiple parties to make it all happen.
The majority of the participants are very familiar. The most familiar face in the exchange is the real estate agent. Then, the lender provides the financial capital needed to finance the deal. And the title company sees to it that all aspects of the transaction are completed and that the title is clear to transfer to the buyer from the seller.
So, who's responsible for making sure the value of the real estate is in line with the amount being paid? In comes the appraiser. We provide an unbiased opinion of what a buyer could expect to pay — or a seller receive — for a parcel of real estate, 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.
Appraisals start with the property inspection
Our first responsibility at Mike Noble Appraisals 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 really are present and are in the shape a typical person would expect them to be. To make sure the stated size of the property is accurate and convey the layout of the property, the inspection often includes creating a sketch of the floorplan. Most importantly, we identify any obvious amenities - or defects - that would affect the value of the property.
After the inspection, we use 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.
This is where we use information on local construction costs, the cost of labor and other factors to determine how much it would cost to replace the property being appraised. This figure commonly sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.
Appraisers can tell you a lot about the neighborhoods in which they work. They innately understand the value of specific 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. Using knowledge of the value of certain items such as upgraded appliances, additional bathrooms, additional living area, quality of construction, lot size, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject property.
An opinion of what the subject might 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 Montgomery and Elmore, Mike Noble Appraisals can't be beat. This approach to value is commonly awarded the most importance when an appraisal is for a real estate sale.
Valuation Using the Income Approach
A third method of valuing real estate is sometimes used when an area has a measurable number of renter occupied properties. In this case, the amount of revenue the property produces is factored in with other rents in the area for comparable properties to derive the current value.
The Bottom Line
Examining the data from all approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. The estimate of value at the bottom of the appraisal report is not always what's being paid for the property even though it is likely the best indication of what a property is worth. Prices can always 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 put the property on the market again. Here's what it all boils down to, an appraiser from Mike Noble Appraisals will guarantee you discover the most accurate property value, so you can make wise real estate decisions.