An Overview of the Appraisal Process
Buying a house can be the most significant investment many people may ever encounter. It doesn't matter if where you raise your family, a seasonal vacation home or a rental fixer upper, purchasing real property is a detailed transaction that requires multiple people working in concert to see it through.
It's likely you are familiar with the parties having a role in the transaction. The most familiar face in the exchange is the real estate agent. Next, the bank provides the financial capital necessary to bankroll the deal. And ensuring all requirements of the transaction are completed and that the title is clear to pass from the seller to the buyer is the title company.
So, who's responsible for making sure the property is worth the amount being paid? 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 property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Maxvalue Appraisal Inc will ensure, you as an interested party, are informed.
Inspecting the subject property
Our first duty at Maxvalue Appraisal Inc is to inspect the property to determine its true status. We must see features first hand, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they truly exist and are in the shape a reasonable buyer would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is correct and conveying the layout of the property. Most importantly, we look for any obvious features - or defects - that would affect the value of the property.
Next, after the inspection, we use two or three approaches to determining the value of real property: sales comparison and, in the case of a rental property, an income approach.
This is where the appraiser analyzes information on local building costs, labor rates and other factors to determine how much it would cost to replace the property being appraised. This estimate often sets the upper limit on what a property would sell for. It's also the least used method.
Analyzing Comparable Sales
Appraisers are intimately familiar with the neighborhoods in which they work. They innately understand the value of particular features to the homeowners of that area. Then, the appraiser looks up recent sales in close proximity to the subject and finds properties which are 'comparable' to the subject at hand. Using knowledge of the value of certain items such as upgraded appliances, additional bathrooms, additional living area, quality of construction, lot size, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject.
An opinion of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. At Maxvalue Appraisal Inc, we are experts when it comes to knowing the value of particular items in Freeport and Nassau County neighborhoods. The sales comparison approach to value is most often awarded the most importance when an appraisal is for a home exchange.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - the appraiser may use a third approach to value. In this scenario, the amount of income the real estate yields is taken into consideration along with other rents in the area for comparable properties to derive the current value.
Analyzing the data from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. It is important to note that while the appraised value is probably the most reliable indication of what a property is worth, it probably will not be the final sales price. It's not uncommon for prices to be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. But 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 case they had to sell the property again. The bottom line is, an appraiser from Maxvalue Appraisal Inc will help you get the most accurate property value, so you can make profitable real estate decisions.
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