Making Sense of the Appraisal Process
Buying a home can be the biggest investment many people could ever make. Whether it's a primary residence, an additional vacation property or one of many rentals, the purchase of real property is an involved transaction that requires multiple parties to make it all happen.
You're probably familiar with the parties having a role in the transaction. The real estate agent is the most known person in the transaction. Then, the bank provides the money required to bankroll the exchange. And ensuring all requirements of the sale are completed and that the title is clear to pass from the seller to the purchaser is the title company.
So, who makes sure the property is worth 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 property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Landmark Appraisals & Reviews, Inc. will ensure, you as an interested party, are informed.
Appraisals begin with the home inspection
Our first responsibility at Landmark Appraisals & Reviews, 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, amenities, etc., to ensure they truly are there and are in the shape a reasonable buyer would expect them to be. To ensure the stated size of the property is accurate and describe the layout of the house, the inspection often entails creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious amenities - or defects - that would affect the value of the house.
Once the site has been inspected, an appraiser uses 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 the appraiser analyzes information on local construction costs, labor rates and other elements to determine how much it would cost to build a property similar to the one being appraised. This value commonly sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.
Appraisers get to know the subdivisions in which they work. They innately understand the value of particular features to the people of that area. Then, the appraiser researches recent sales in the area and finds properties which are 'comparable' to the real estate in question. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, 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. At Landmark Appraisals & Reviews, Inc., we are experts when it comes to knowing the worth of real estate features in Gainesville and Alachua County neighborhoods. This approach to value is commonly given the most importance when an appraisal is for a real estate purchase.
Valuation Using the Income Approach
A third method of valuing a property is sometimes employed when a neighborhood has a reasonable number of rental properties. In this case, the amount of income the real estate produces is taken into consideration along with income produced by neighboring properties to determine the current value.
The Bottom Line
Analyzing the data from all applicable approaches, the appraiser is then ready to put down an estimated market value for the property in question. Note: While the appraised value is probably the best indication of what a property is worth, it may not be the final sales price. There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust the final price up or down. But the appraised value is typically employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. It all comes down to this, an appraiser from Landmark Appraisals & Reviews, Inc. will help you get the most accurate property value, so you can make profitable real estate decisions.