Real Estate Appraisals: A PrimerOne's home purchase is the most significant transaction many of us may ever encounter. Whether it's where you raise your family, a seasonal vacation property or one of many rentals, the purchase of real property is an involved transaction that requires multiple people working in concert to see it through.
Most of the participants are quite familiar. The real estate agent is the most familiar entity in the exchange. Next, the lender provides the money needed to fund the exchange. The title company ensures that all details of the exchange are completed and that the title is clear to pass to the buyer from the seller.
So what party makes sure the property is consistent with the purchase price? This is where you meet the appraiser. We provide an unbiased estimate of what a buyer might expect to pay - or a seller receive - for a parcel of real estate, where both buyer and seller are informed parties. A professional West Virginia licensed appraiser from Advantage Valley Appraisal, LLC will ensure you as an interested party are informed.
Inspecting the subject propertyTo ascertain an accurate status of the property, it's our duty to first conduct a thorough inspection. We must see features hands on, such as the number of bedrooms and bathrooms, the location, living areas, etc., to ensure they truly exist and are in the shape a typical person would expect them to be. To ensure the stated square footage has not been misrepresented and document the layout of the house, the inspection often includes creating a sketch of the floor plan. Most importantly, the appraiser looks for any obvious features - or defects - that would have an impact on the value of the house.
Following the inspection, an appraiser employs two or three approaches when determining the value of real property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.
Replacement CostThis is where the appraiser analyzes information on local building costs, the cost of labor and other factors to derive how much it would cost to replace the property being appraised. This value often sets the maximum on what a property would sell for. It's also the least used method.
Paired Sales AnalysisAppraisers can tell you a lot about the subdivisions in which they appraise. We thoroughly 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 real estate at hand. 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 more accurately portray the features of subject.
Valuation Using the Income ApproachIn the case of income producing properties - rental houses for example - the appraiser may use a third approach to value. In this situation, the amount of income the real estate produces is factored in with other rents in the area for comparable properties to derive the current value.
Putting It All TogetherCombining information from all approaches, the appraiser is then ready to put down an estimated market value for the property in question. The estimate of value on the appraisal report is not necessarily the final sales price even though it is likely the best indication of a property's market value Depending on the specific circumstances 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 often used as a guideline for lenders who don't want to loan a buyer more money than the property would likely sell for in an open marketplace. The bottom line is: An appraiser from Advantage Valley Appraisal, LLC will help you discover the most accurate property value, so you can make wise real estate decisions.