Home Appraisals: A Primer
Buying a home is the largest transaction most might ever encounter. It doesn't matter if where you raise your family, a seasonal vacation home or a rental fixer upper, 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 people involved are very familiar. The real estate agent is the most familiar entity in the exchange. Then, the lender provides the money necessary to finance the deal. And ensuring all requirements of the sale are completed and that a clear title passes to the buyer from the seller is the title company.
So, what party is responsible for making sure the real estate is worth the purchase price? This is where you meet 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 S. Brown & Company will ensure, you as an interested party, are informed.
Inspecting the subject property
To determine the true status of the property, it's our responsibility to first conduct a thorough inspection. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really exist 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 accurate and illustrating the layout of the property. Most importantly, we identify any obvious features - or defects - that would affect the value of the house.
Next, after the inspection, an appraiser uses two or three approaches to determining the value of the property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.
This is where we use information on local building costs, the cost of labor and other elements to determine how much it would cost to construct a property nearly identical to the one being appraised. This estimate usually sets the maximum on what a property would sell for. The cost approach is also the least used method.
Paired Sales Analysis
Appraisers are intimately familiar with the communities in which they appraise. They innately understand the value of specific features to the residents of that area. Then, the appraiser researches recent transactions in close proximity to the subject and finds properties which are 'comparable' to the subject at hand. Using knowledge of the value of certain items such as square footage, extra bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we add or subtract from each comparable's sales price so that they more accurately match the features of subject property.
A valid estimate of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. When it comes to putting a value on features of homes in Harrington and Kent, S. Brown & Company can't be beat. This approach to value is usually awarded the most weight when an appraisal is for a home sale.
Valuation Using the Income Approach
A third way of valuing real estate is sometimes used when an area has a measurable number of rental properties. In this situation, the amount of income the real estate produces is factored in with other rents in the area for comparable properties to determine the current value.
Putting It All Together
Combining information from all approaches, the appraiser is then ready to state an estimated market value for the property in question. It is important to note that while this amount is probably the strongest indication of what a house is worth, it may not be the final sales price. Depending on the individual situations 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 typically used as a guideline for lenders who don't want to loan a buyer more money than they could recover in the event they had to put the property on the market again. Here's what it all boils down to, an appraiser from S. Brown & Company will guarantee you attain the most fair and balanced property value, so you can make wise real estate decisions.