What Goes Into an Appraisal?
Their home's purchase can be the largest financial decision many could ever make. Whether it's where you raise your family, a seasonal vacation property or a rental fixer upper, purchasing real property is a complex transaction that requires multiple parties to see it through.
Practically all the participants are quite familiar. The most known person in the transaction is the real estate agent. Next, the lender provides the money necessary to fund the deal. And ensuring all aspects of the sale are completed and that the title is clear to transfer from the seller to the purchaser is the title company.
So, who makes sure the property is worth the amount being paid? This is where the appraiser comes in. We provide an unbiased estimate 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 Barrasas Real Estate Appraisals, LLC will ensure, you as an interested party, are informed.
The inspection is where an appraisal starts
Our first responsibility at Barrasas Real Estate Appraisals, LLC is to inspect the property to ascertain its true status. We must actually 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 reasonable buyer would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is correct and conveying the layout of the property. Most importantly, we look for any obvious features - or defects - that would have an impact on the value of the property.
Following the inspection, an appraiser uses two or three approaches to determining the value of real property: paired sales analysis and, in the case of a rental property, an income approach.
Here, the appraiser uses information on local building costs, labor rates and other factors to determine how much it would cost to replace the property being appraised. This figure often sets the maximum on what a property would sell for. The cost approach is also the least used method.
Analyzing Comparable Sales
Appraisers become very familiar with the subdivisions in which they appraise. They thoroughly understand the value of specific features to the residents of that area. Then, the appraiser researches recent transactions in the neighborhood and finds properties which are 'comparable' to the property being appraised. Using knowledge of the value of certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or extra storage space, 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 knowing the true value of features of homes in Valparaiso and Porter, Barrasas Real Estate Appraisals, LLC can't be beat. The sales comparison approach to value is typically awarded the most importance 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 situation, the amount of revenue the real estate produces is factored in with other rents in the area for comparable properties to give an indicator of the current value.
Examining the data from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the property in question. The estimate of value at the bottom of the appraisal report is not always what's being paid for the property even though it is likely the best indication of what a property is worth. Depending on the individual situations of the buyer or seller, their level of urgency or a buyer's desire for that exact property, the closing price of a home can always be driven 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 the property is actually worth. The bottom line is, an appraiser from Barrasas Real Estate Appraisals, LLC will guarantee you get the most accurate property value, so you can make profitable real estate decisions.