What are the components of an appraisal?One's home purchase is the largest financial decision many people may ever consider. It doesn't matter if it's a primary residence, a second vacation property or one of many rentals, purchasing real property is a detailed transaction that requires multiple parties to pull it all off.
The majority of the participants are very familiar. The real estate agent is the most known face in the transaction. Next, the mortgage company provides the financial capital necessary to finance the deal. Ensuring all requirements of the exchange are completed and that a clear title passes from the seller to the purchaser is the title company.
So who's responsible for making sure the real estate is consistent with the amount being paid? This is where the appraiser comes in. We provide an unbiased opinion 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 professional Alabama licensed appraiser from Woods Appraisal, LLC will ensure you as an interested party are informed.
The inspection is where an appraisal startsTo ascertain the true status of the property, it's our duty to first perform a thorough inspection. We must physically view aspects of the property, such as the number of bedrooms and bathrooms, the location, living areas, etc., to ensure they really exist and are in the shape a typical person would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is accurate and conveying the layout of the property. Most importantly, we look for any obvious amenities - or defects - that would affect the value of the property.
After the inspection, an appraiser employs two or three approaches when determining the value of the property: paired sales analysis and, in the case of a rental property, an income approach.
Replacement CostHere, we use information on local construction costs, labor rates and other elements to derive how much it would cost to build a property nearly identical to the one being appraised. This figure commonly sets the upper limit on what a property would sell for. It's also the least used method.
Paired Sales AnalysisAppraisers are intimately familiar with the subdivisions in which they work. We innately understand the value of certain 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 home being appraised. By assigning a dollar value to certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or additional storage space, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject property.
Valuation Using the Income ApproachA third method of valuing a property is sometimes applied when a neighborhood has a reasonable number of renter occupied properties. In this situation, the amount of revenue the real estate produces is taken into consideration along with income produced by neighboring properties to derive the current value.
Putting It All TogetherAnalyzing the data from all approaches, the appraiser is then ready to state an estimated market value for the property in question. 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 market value Prices can always be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. But the appraised value is often employed as a guideline for lenders who don't want to loan a buyer more money than the property would likely sell for in an open marketplace. At the end of the day: An appraiser from Woods Appraisal, LLC will help you discover the most accurate property value, so you can make wise real estate decisions.