What Are the Parts of an Appraisal?
A home purchase can be the most important financial decision some people may ever encounter. It doesn't matter if where you raise your family, an additional vacation home or one of many rentals, the purchase of real property is an involved transaction that requires multiple people working in concert to pull it all off.
The majority of the participants are very familiar. The most recognizable face in the transaction is the real estate agent. Next, the mortgage company provides the financial capital necessary to finance the exchange. The title company makes sure that all details of the exchange are completed and that a clear title transfers to the buyer from the seller.
So, what party makes sure the property is worth the amount being paid? In comes 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 Accredited Appraisals will ensure, you as an interested party, are informed.
The inspection is where an appraisal starts
Our first task at Accredited Appraisals is to inspect the property to determine its true status. We must physically see features, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they truly are there and are in the condition a typical buyer 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 affect the value of the property.
Following the inspection, an appraiser uses two or three approaches to determining the value of real property: paired sales analysis and, in the case of a rental property, an income approach.
This is where the appraiser pulls information on local building costs, labor rates and other elements to derive how much it would cost to construct a property similar to the one being appraised. This estimate usually sets the maximum on what a property would sell for. It's also the least used predictor of value.
Appraisers become very familiar with the communities in which they appraise. They thoroughly understand the value of particular features to the people of that area. Then, the appraiser researches recent transactions in the vicinity and finds properties which are 'comparable' to the real estate in question. By assigning a dollar value to certain items such as upgraded appliances, extra bathrooms, additional living area, quality of construction, lot size, we adjust the comparable properties so that they are more accurately in line with the features of subject property.
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 Accredited Appraisals, we are experts when it comes to knowing the value of real estate features in Evergreen Park and Cook County neighborhoods. This approach to value is most often awarded the most importance when an appraisal is for a home purchase.
Valuation Using the Income Approach
A third way of valuing real estate is sometimes applied when an area has a measurable number of rental properties. In this situation, the amount of income the property produces is taken into consideration along with income produced by similar properties to give an indicator of the current value.
Putting It All Together
Combining information from all approaches, the appraiser is then ready to stipulate an estimated market value for the property at hand. The estimate of value at the bottom of 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.Regardless, 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. It all comes down to this, an appraiser from Accredited Appraisals will guarantee you discover the most accurate property value, so you can make the most informed real estate decisions.