What Are the Components of an Appraisal?
Getting real estate is the most important financial decision many of us may ever encounter. It doesn't matter if 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.
It's likely you are familiar with the parties having a role in the transaction. The most known person in the exchange is the real estate agent. Next, the bank provides the money necessary to finance the exchange. And ensuring all areas 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 real estate is consistent with 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 Maxvalue Appraisal Inc will ensure, you as an interested party, are informed.
Appraisals begin with the inspection
Our first task at Maxvalue Appraisal Inc is to inspect the property to ascertain its true status. We must see features hands on, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they truly are present and are in the shape a reasonable buyer would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is proper and conveying the layout of the property. Most importantly, the appraiser identifies any obvious features - or defects - that would affect the value of the property.
Next, after the inspection, 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, we use information on local building costs, labor rates and other factors to figure out how much it would cost to build a property comparable 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 predictor of value.
Paired Sales Analysis
Appraisers can tell you a lot about the subdivisions 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 home being appraised. Using knowledge of the value of certain items such as square footage, additional bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we adjust the comparable properties so that they more accurately portray 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. When it comes to associating a value with features of homes in Freeport and Nassau, Maxvalue Appraisal Inc can't be beat. The sales comparison approach to value is typically given the most importance when an appraisal is for a real estate purchase.
Valuation Using the Income Approach
A third way of valuing real estate is sometimes employed when a neighborhood has a reasonable number of renter occupied properties. In this scenario, the amount of revenue the real estate generates is factored in with other rents in the area for comparable properties to determine the current value.
The Bottom Line
Examining the data from all applicable approaches, the appraiser is then ready to state an estimated market value for the property at hand. The estimate of value on the appraisal report is not always the final sales price even though it is likely the best indication of a property's valueThere are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust an offer or listing price up or down. But 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. It all comes down to this, an appraiser from Maxvalue Appraisal Inc will guarantee you attain the most fair and balanced property value, so you can make wise real estate decisions.
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