What Are the Components of an Appraisal?
A home purchase can be the largest transaction most of us could ever make. It doesn't matter if a primary residence, an additional vacation property or an investment, the purchase of real property is a detailed financial transaction that requires multiple parties to see it through.
Practically all the parties participating are very familiar. The most known entity in the transaction is the real estate agent. Next, the bank provides the money needed to bankroll the deal. And ensuring all requirements of the exchange are completed and that a clear title transfers from the seller to the buyer is the title company.
So, who's responsible for making sure the value of the property is in line with the amount being paid? 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.
Inspecting the subject property
Our first duty at Gordon Appraisal Company, Inc. is to inspect the property to determine its true status. We must physically see features, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they indeed are there and are in the condition a typical buyer would expect them to be. To make sure the stated square footage has not been misrepresented and convey the layout of the property, the inspection often requires creating a sketch of the floorplan. Most importantly, the appraiser looks for any obvious features - or defects - that would affect the value of the property.
Back at the office, we use two or three approaches to determining the value of real property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.
Here, the appraiser uses information on local construction costs, labor rates and other factors to figure out how much it would cost to construct a property similar to the one being appraised. This estimate commonly sets the maximum on what a property would sell for. The cost approach is also the least used method.
Paired Sales Analysis
Appraisers can tell you a lot about the neighborhoods in which they appraise. They thoroughly understand the value of particular features to the residents of that area. Then, the appraiser looks up recent sales in close proximity to the subject and finds properties which are 'comparable' to the real estate being appraised. 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 add or subtract from each comparable's sales price so that they more accurately match the features of subject.
An opinion of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. At Gordon Appraisal Company, Inc., we are an authority when it comes to knowing the worth of particular items in Lincoln and Providence County neighborhoods. This approach to value is usually awarded the most consideration when an appraisal is for a real estate exchange.
Valuation Using the Income Approach
A third way of valuing a house is sometimes employed when an area has a reasonable number of rental properties. In this case, the amount of income the real estate yields is factored in with income produced by nearby properties to give an indicator of the current value.
Analyzing the data from all applicable approaches, the appraiser is then ready to document an estimated market value for the subject property. Note: While this amount is probably the strongest indication of what a property is worth, it may not be the price at which the property closes. Depending on the individual 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 is actually worth. Here's what it all boils down to, 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.