What Is an Appraisal?
Buying a house can be the biggest investment some might ever consider. It doesn't matter if where you raise your family, a second vacation property or an investment, the purchase of real property is an involved transaction that requires multiple parties to pull it all off.
You're likely to be familiar with the parties having a role in the transaction. The most recognizable face in the transaction is the real estate agent. Next, the bank provides the money necessary to fund the exchange. The title company sees to it that all requirements of the exchange are completed and that a clear title transfers to the buyer from the seller.
So, what party makes sure the value of the property is in line with the amount being paid? This is where the appraiser comes in. 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 Real Property Metrics will ensure, you as an interested party, are informed.
Inspecting the subject property
Our first responsibility at Real Property Metrics is to inspect the property to ascertain its true status. We must actually see features, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed exist and are in the condition a reasonable person would expect them to be. To make sure the stated square footage is accurate and convey the layout of the house, the inspection often entails creating a sketch of the floorplan. Most importantly, we look for any obvious amenities - or defects - that would affect the value of the house.
Following the inspection, an appraiser uses 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.
Here, the appraiser analyzes information on local building costs, labor rates and other factors to calculate how much it would cost to replace the property being appraised. This estimate commonly sets the upper limit on what a property would sell for. It's also the least used predictor of value.
Appraisers can tell you a lot about the subdivisions in which they work. They innately understand the value of certain features to the homeowners of that area. Then, the appraiser researches recent transactions in the neighborhood and finds properties which are 'comparable' to the home in question. By assigning a dollar value to certain items such as upgraded appliances, additional bathrooms, additional living area, quality of construction, lot size, we add or subtract from each comparable's sales price so that they more accurately portray 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. When it comes to associating a value with features of homes in Lake Worth and Palm Beach, Real Property Metrics is second to none. This approach to value is commonly given the most weight when an appraisal is for a real estate exchange.
Valuation Using the Income Approach
A third way of valuing a house is sometimes applied when an area has a reasonable number of rental properties. In this case, the amount of revenue the property produces is factored in with other rents in the area for comparable properties to give an indicator of the current value.
Arriving at a Value Conclusion
Combining information from all applicable approaches, the appraiser is then ready to document an estimated market value for the property in question. It is important to note that while the appraised value is probably the best indication of what a property is worth, it may not be the final sales price. Prices can always be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. But the appraised value is typically used 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 Real Property Metrics will help you attain the most fair and balanced property value, so you can make the most informed real estate decisions.