What Are the Components of an Appraisal?
A home purchase can be the most important transaction most of us may ever encounter. It doesn't matter if where you raise your family, a second vacation property or a rental fixer upper, the purchase of real property is an involved financial transaction that requires multiple people working in concert to see it through.
Practically all the people involved are very familiar. The real estate agent is the most known face in the transaction. Then, the mortgage company provides the money required to finance the transaction. And ensuring all areas of the transaction are completed and that a clear title transfers from the seller to the buyer is the title company.
So, what party makes sure the value of the property is consistent with the amount being paid? This is where you meet 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 Advantage Appraisal Inc. (207) 794-2018 will ensure, you as an interested party, are informed.
Inspecting the subject property
Our first duty at Advantage Appraisal Inc. (207) 794-2018 is to inspect the property to ascertain its true status. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really are present and are in the shape a reasonable person would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is correct and illustrating the layout of the property. Most importantly, we identify any obvious amenities - or defects - that would have an impact on the value of the house.
Back at the office, an appraiser uses two or three approaches to determining the value of the property: paired sales analysis and, in the case of a rental property, an income approach.
Here, we analyze information on local construction costs, labor rates and other factors to calculate how much it would cost to replace the property being appraised. This value commonly sets the maximum on what a property would sell for. It's also the least used predictor of value.
Paired Sales Analysis
Appraisers are intimately familiar with the neighborhoods in which they work. They innately understand the value of particular features to the people of that area. Then, the appraiser looks up recent sales in close proximity to the subject and finds properties which are 'comparable' to the home being appraised. Using knowledge of the value of certain items such as upgraded appliances, extra bathrooms, additional living area, quality of construction, lot size, we add or subtract from each comparable's sales price so that they more accurately match the features of subject.
An opinion of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. At Advantage Appraisal Inc. (207) 794-2018, we are experts in knowing the value of real estate features in Lincoln and Penobscot County neighborhoods. This approach to value is usually given the most weight when an appraisal is for a real estate sale.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - we may use an additional way of valuing a property. In this case, the amount of income the real estate yields is factored in with income produced by neighboring properties to derive the current value.
Combining information from all 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 always what's being paid for the property even though it is likely the best indication of a property's valueDepending on the specific circumstances 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 used as a guideline for lenders who don't want to loan a buyer more money than they could get back in case they had to sell the property again. It all comes down to this, an appraiser from Advantage Appraisal Inc. (207) 794-2018 will guarantee you get the most accurate property value, so you can make profitable real estate decisions.