Comprehending Appraisals

Buying real estate is the most significant investment some people may ever encounter. Whether it's where you raise your family, a seasonal vacation property or one of many rentals, purchasing real property is a complex financial transaction that requires multiple parties to pull it all off.

It's likely you are familiar with the parties taking part in the transaction. The real estate agent is the most recognizable person in the exchange. Next, the mortgage company provides the money required to bankroll the exchange. And ensuring all areas of the transaction are completed and that a clear title passes from the seller to the purchaser is the title company.

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So, what party makes sure the value of the real estate is consistent with the amount being paid? In comes the appraiser. We provide an unbiased estimate of what a buyer might expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Advantage Appraisal Inc. (207) 794-2018 will ensure, you as an interested party, are informed.

Inspecting the subject property

Our first task at Advantage Appraisal Inc. (207) 794-2018 is to inspect the property to determine its true status. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed exist and are in the shape a reasonable person would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is proper and conveying the layout of the property. Most importantly, the appraiser identifies any obvious features - or defects - that would affect the value of the property.

After the inspection, an appraiser uses two or three approaches to determining the value of real property: sales comparison and, in the case of a rental property, an income approach.

Cost Approach

This is where we analyze information on local building costs, the cost of labor and other factors to figure out how much it would cost to replace the property being appraised. This estimate often sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.

Analyzing Comparable Sales

Appraisers can tell you a lot about the neighborhoods in which they appraise. They thoroughly understand the value of particular features to the people of that area. Then, the appraiser looks up recent sales in the area and finds properties which are 'comparable' to the subject at hand. 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 add or subtract from each comparable's sales price so that they more accurately match the features of subject property.

  • Say, for example, the comparable has an irrigation system and the subject doesn't, the appraiser may subtract the value of an irrigation system from the sales price of the comparable home.
  • In the case where the subject has something such as an extra half bath that a comparable doesn't have, the appraiser might add the value of that bath to the comparable 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 valuing features of homes in Lincoln and Penobscot, Advantage Appraisal Inc. (207) 794-2018 can't be beat. This approach to value is usually awarded the most importance when an appraisal is for a home sale.

Valuation Using the Income Approach

A third method of valuing a property is sometimes applied when a neighborhood has a reasonable number of renter occupied properties. In this situation, the amount of revenue the real estate yields is taken into consideration along with income produced by neighboring properties to give an indicator of the current value.

Putting It All Together

Analyzing the data from all approaches, the appraiser is then ready to state an estimated market value for the property at hand. The estimate of value at the bottom of the appraisal report is not necessarily what's being paid for the property even though it is likely the best indication of what a property is worth. There 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. 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 Advantage Appraisal Inc. (207) 794-2018 will help you attain the most fair and balanced property value, so you can make profitable real estate decisions.