Real Estate Appraisals: A Primer
Their home's purchase can be the most significant investment most could ever encounter. It doesn't matter if where you raise your family, an additional vacation property or a rental fixer upper, the purchase of real property is an involved financial transaction that requires multiple parties to pull it all off.
Practically all the participants are very familiar. The real estate agent is the most recognizable person in the transaction. Next, the lender provides the financial capital needed to finance the transaction. And the title company sees to it that all aspects of the exchange are completed and that a clear title passes to the buyer from the seller.
So, who makes sure the value of the property is in line with the purchase price? In comes the appraiser. We provide an unbiased opinion of what a buyer could 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 Bear Rock Appraisal will ensure, you as an interested party, are informed.
Appraisals start with the inspection
To determine an accurate 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, amenities, etc., to ensure they truly are present and are in the shape a typical person would expect them to be. To ensure the stated size of the property has not been misrepresented and convey the layout of the home, the inspection often includes creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious amenities - or defects - that would have an impact on the value of the property.
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.
This is where we use 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 commonly sets the upper limit on what a property would sell for. It's also the least used predictor of value.
Appraisers get to know the communities in which they work. They innately understand the value of specific 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 property in question. Using knowledge of the value of certain items such as upgraded appliances, additional bathrooms, additional living area, quality of construction, lot size, we adjust the comparable properties so that they are more accurately in line with the features of subject property.
After all differences have been accounted for, 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 Cortland and Cortland, Bear Rock Appraisal can't be beat. This approach to value is usually awarded the most consideration when an appraisal is for a real estate purchase.
Valuation Using the Income Approach
A third method of valuing a house is sometimes used when a neighborhood has a reasonable number of rental properties. In this situation, the amount of revenue the property produces is factored in with income produced by similar properties to derive the current value.
Coming Up With The Final Value
Combining information from all approaches, the appraiser is then ready to put down an estimated market value for the property in question. The estimate of value at the bottom of the appraisal report is not always the final sales price even though it is likely the best indication of what a property is worth. 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. Here's what it all boils down to, an appraiser from Bear Rock Appraisal will guarantee you get the most fair and balanced property value, so you can make the most informed real estate decisions.