Real Property Appraisals: A Primer
Their home's purchase can be the most significant transaction some may ever encounter. Whether it's where you raise your family, a second vacation property or an investment, the purchase of real property is a complex financial transaction that requires multiple people working in concert to pull it all off.
Most of the participants are quite familiar. The real estate agent is the most recognizable entity in the transaction. Then, the bank provides the financial capital necessary to bankroll the deal. The title company ensures that all details of the sale are completed and that a clear title passes from the seller to the buyer.
So, what party is responsible for making sure the property is worth the purchase price? This is where the appraiser comes in. We provide an unbiased estimate 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 Timberline Appraisals will ensure, you as an interested party, are informed.
The inspection is where an appraisal starts
Our first task at Timberline Appraisals is to inspect the property to ascertain its true status. We must see features first hand, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they really exist and are in the shape a typical buyer would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is proper and conveying the layout of the property. Most importantly, the appraiser looks for any obvious amenities - 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 the property: paired sales analysis and, in the case of a rental property, an income approach.
Here, we pull information on local building costs, labor rates and other elements to derive how much it would cost to build a property similar to the one being appraised. This figure commonly sets the maximum on what a property would sell for. It's also the least used method.
Paired Sales Analysis
Appraisers become very familiar with the subdivisions in which they appraise. They thoroughly understand the value of particular 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 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 add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject.
A valid 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 Timberline Appraisals, we are experts when it comes to knowing the worth of real estate features in Brodhead and Green County neighborhoods. The sales comparison approach to value is usually given the most importance when an appraisal is for a real estate purchase.
Valuation Using the Income Approach
A third way of valuing real estate is sometimes employed when a neighborhood has a reasonable number of renter occupied properties. In this case, the amount of revenue the property generates is factored in with other rents in the area for comparable properties to derive the current value.
Arriving at a Value Conclusion
Examining the data from all approaches, the appraiser is then ready to put down an estimated market value for the property at hand. 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. Depending on the specific 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.Regardless, the appraised value is typically employed as a guideline for lenders who don't want to loan a buyer more money than they could recover in the event they had to put the property on the market again. It all comes down to this, an appraiser from Timberline Appraisals will guarantee you discover the most fair and balanced property value, so you can make profitable real estate decisions.