What Is an Appraisal?
Their home's purchase is the biggest transaction most of us could ever encounter. It doesn't matter if a main residence, 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.
It's likely you are familiar with the parties having a role in the transaction. The most familiar person in the exchange is the real estate agent. Then, the mortgage company provides the money necessary to finance the exchange. And ensuring all aspects of the transaction are completed and that the title is clear to transfer to the buyer from the seller is the title company.
So, who's responsible for making sure the property is worth 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 Homeowner Appraisal Services will ensure, you as an interested party, are informed.
The inspection is where an appraisal starts
To ascertain an accurate status of the property, it's our responsibility to first perform a thorough inspection. We must see features hands on, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly exist and are in the shape a reasonable buyer 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, we identify any obvious features - or defects - that would affect the value of the house.
Back at the office, 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.
This is where we pull information on local building costs, the cost of labor and other elements to derive how much it would cost to replace the property being appraised. This value usually sets the maximum on what a property would sell for. It's also the least used predictor of value.
Analyzing Comparable Sales
Appraisers become very familiar with the subdivisions in which they work. They innately understand the value of specific 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 home 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 adjust the comparable properties so that they more accurately match the features of subject.
Once all necessary adjustments have been made, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At Homeowner Appraisal Services, we are experts when it comes to knowing the value of particular items in Ponte Vedra and Saint Johns County neighborhoods. The sales comparison approach to value is most often awarded the most weight when an appraisal is for a real estate 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 income the real estate 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 approaches, the appraiser is then ready to state an estimated market value for the property at hand. It is important to note that while this amount is probably the strongest indication of what a house is worth, it probably will not be the price at which the property closes. 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 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 Homeowner Appraisal Services will guarantee you discover the most accurate property value, so you can make the most informed real estate decisions.