What Is an Appraisal?
Acquiring a home can be the biggest investment most will ever make. Whether it's where you raise your family, an additional vacation home or an investment, purchasing real property is a complex transaction that requires multiple parties to pull it all off.
It's likely that you will be familiar with the parties having a role in the transaction. The most familiar face in the transaction is the real estate agent. Next, the lender provides the financial capital needed to bankroll the exchange. Ensuring that all details of the exchange are completed and that the title is clear to pass to the buyer from the seller is the title company.
So, what party makes sure the property is worth the purchase price? This is where the appraiser comes in. 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 licensed, certified, professional appraiser from Passage Appraisal, LLC will ensure that you, as an interested party, are informed.
The inspection is where an appraisal starts
To ascertain the true status of the property, it's our duty to first complete a thorough inspection. 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 condition a typical buyer would expect them to be. To make sure the stated size of the property has not been misrepresented and describe the layout of the home, the inspection often includes creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious features - or defects - that would affect the value of the property.
Back at the office, an appraiser uses two or three approaches to determining the value of real property: sales comparison and, in the case of a rental property, an income approach.
Here, the appraiser gathers information on local building costs, labor rates and other elements to ascertain how much it would cost to build a property comparable to the one being appraised. This value often sets the upper limit on what a property would sell for. It's also the least used predictor of value.
Appraisers can tell you a lot about the counties in which they appraise. They innately understand the value of relevant, particular features to the people 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 at hand. By assigning a dollar value to certain items such as upgraded appliances, additional bathrooms, additional living area, quality of construction and lot size, we adjust the comparable properties so that they more accurately portray the features of the subject.
A true estimate of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. At Passage Appraisal, LLC, we are experts when it comes to knowing the worth of real estate features in Washington county neighborhoods. This approach to value is usually given the most importance when an appraisal is for a real estate exchange.
Valuation Using the Income Approach
In the case of income producing properties - rental houses, condos, apartments for example - we may use a third approach to value. In this situation, the amount of revenue the property produces is taken into consideration along with income produced by similar properties to give an indicator of the current value.
Arriving at a Value Conclusion
Combining information from all approaches, the appraiser is then ready to document an estimated market value for the property at hand. It is important to note that while the appraised value is probably the strongest indication of what a property is worth, it probably will not be the price at which the property closes. Prices can always 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 employed as a guideline for lenders who don't want to loan a buyer more money than they could get back in case they had to put the property on the market again. Here's what it all boils down to, an appraiser from Passage Appraisal, LLC will guarantee that you get the most fair and balanced property value, so that you are able to make a wise real estate decision.