What Is an Appraisal?
Acquiring a home is the most significant investment some of us will ever make. Whether it's where you raise your family, a second vacation property or one of many rentals, the purchase of real property is a complex financial transaction that requires multiple people working in concert to pull it all off.
Most people are familiar with the parties taking part in the transaction. The most familiar face in the exchange is the real estate agent. Next, the mortgage company provides the financial capital needed to bankroll the transaction. And ensuring all requirements of the transaction are completed and that the title is clear to pass to the buyer from the seller is the title company.
So, what party is responsible for making sure the real estate is worth the purchase price? In comes the appraiser. We provide an unbiased estimate 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 Gordon Appraisal Company, Inc. will ensure, you as an interested party, are informed.
Appraisals start with the inspection
To ascertain an accurate status of the property, it's our responsibility to first conduct a thorough inspection. We must physically view features, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they really are present 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 correct and illustrating the layout of the property. Most importantly, we identify any obvious amenities - or defects - that would affect the value of the house.
Back at the office, we use two or three approaches to determining the value of real property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.
Here, we use information on local building costs, labor rates and other elements to figure out how much it would cost to replace the property being appraised. This figure commonly sets the upper limit on what a property would sell for. The cost approach is also the least used method.
Analyzing Comparable Sales
Appraisers get to know the communities in which they work. They innately understand the value of certain features to the homeowners of that area. Then, the appraiser looks up recent sales in the vicinity and finds properties which are 'comparable' to the real estate at hand. By assigning a dollar value to certain items such as square footage, extra bathrooms, hardwood floors, fireplaces or view lots (just to name a few), 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 Gordon Appraisal Company, Inc., we are an authority in knowing the value of real estate features in Lincoln and Providence County neighborhoods. This approach to value is most often given the most importance when an appraisal is for a home purchase.
Valuation Using the Income Approach
A third way of valuing real estate is sometimes employed when a neighborhood has a reasonable number of rental properties. In this case, the amount of income the property yields is taken into consideration along with other rents in the area for comparable properties to derive the current value.
Examining the data from all applicable approaches, the appraiser is then ready to document an estimated market value for the property at hand. 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 valueDepending 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 used 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 sell the property again. The bottom line is, an appraiser from Gordon Appraisal Company, Inc. will help you discover the most fair and balanced property value, so you can make the most informed real estate decisions.