Real Property Appraisals: A Primer
Their home's purchase is the most serious transaction most of us could ever encounter. Whether it's a main residence, an additional vacation home or one of many rentals, purchasing real property is a complex transaction that requires multiple parties to see it through.
The majority of the participants are very familiar. The real estate agent is the most recognizable person in the exchange. Then, the mortgage company provides the money necessary to fund the exchange. And the title company makes sure that all aspects of the transaction are completed and that a clear title passes to the buyer from the seller.
So, what party is responsible for making sure the value of the property is consistent with the amount being paid? This is where you meet the appraiser. 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 Quality Appraisals will ensure, you as an interested party, are informed.
The inspection is where an appraisal begins
To determine the true status of the property, it's our responsibility to first perform a thorough inspection. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they indeed are present and are in the condition a typical buyer would expect them to be. To make sure the stated size of the property is accurate and convey the layout of the property, the inspection often entails creating a sketch of the floorplan. Most importantly, we identify any obvious amenities - or defects - that would have an impact on the value of the property.
Next, after the inspection, we use two or three approaches to determining the value of real property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.
This is where we analyze information on local building costs, the cost of labor and other elements to determine how much it would cost to replace the property being appraised. This value often sets the maximum on what a property would sell for. The cost approach is also the least used method.
Analyzing Comparable Sales
Appraisers can tell you a lot about the neighborhoods in which they appraise. They innately understand the value of certain features to the residents of that area. Then, the appraiser researches recent sales in the vicinity 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 adjust the comparable properties so that they are more accurately in line with the features of subject property.
A true estimate of what the subject might 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 Kansas City and Clay, Quality Appraisals can't be beat. This approach to value is most often awarded the most consideration when an appraisal is for a real estate exchange.
Valuation Using the Income Approach
A third method of valuing a property is sometimes applied when an area has a measurable number of rental properties. In this scenario, the amount of revenue the real estate generates is taken into consideration along with other rents in the area for comparable properties to give an indicator of the current value.
Coming Up With The Final Value
Examining the data from all approaches, the appraiser is then ready to put down 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 valueIt'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 often employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. At the end of the day, an appraiser from Quality Appraisals will guarantee you attain the most fair and balanced property value, so you can make the most informed real estate decisions.