An Overview of the Appraisal Process
Their home's purchase can be the most serious transaction most may ever encounter. It doesn't matter if where you raise your family, an additional vacation home or an investment, purchasing real property is a detailed financial transaction that requires multiple parties to see it through.
The majority of the parties participating are very familiar. The most familiar face in the transaction is the real estate agent. Then, the mortgage company provides the money necessary to bankroll the deal. And ensuring all aspects of the exchange are completed and that the title is clear to transfer from the seller to the purchaser 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 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 Martin Appraisal Group will ensure, you as an interested party, are informed.
Inspecting the subject property
Our first duty at Martin Appraisal Group is to inspect the property to determine its true status. We must physically view features, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed are present and are in the condition a typical person would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is proper and illustrating the layout of the property. Most importantly, we identify any obvious amenities - 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.
Here, we pull information on local building costs, the cost of labor and other factors to figure out how much it would cost to build a property similar to the one being appraised. This estimate usually sets the maximum on what a property would sell for. It's also the least used predictor of value.
Paired Sales Analysis
Appraisers become very familiar with the communities in which they work. They thoroughly understand the value of certain features to the residents of that area. Then, the appraiser researches recent sales in the area and finds properties which are 'comparable' to the real estate 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 adjust the comparable properties so that they are more accurately in line with the features of subject property.
A valid estimate of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. When it comes to valuing features of homes in Winchester and Clark, Martin Appraisal Group can't be beat. The sales comparison approach to value is most often awarded the most consideration when an appraisal is for a home purchase.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - the appraiser may use an additional approach to value. In this case, the amount of income the real estate yields is factored in with other rents in the area for comparable properties to derive the current value.
The Bottom Line
Combining information from all applicable approaches, the appraiser is then ready to document an estimated market value for the subject property. The estimate of value on the appraisal report is not necessarily what's being paid for the property even though it is likely the best indication of a property's valueThere are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust the final price up or down. Regardless, the appraised value is typically used as a guideline for lenders who don't want to loan a buyer more money than they could get back in the event they had to sell the property again. Here's what it all boils down to, an appraiser from Martin Appraisal Group will guarantee you get the most fair and balanced property value, so you can make the most informed real estate decisions.