Real Property Appraisals: A Primer
A home purchase can be the biggest financial decision some people could ever consider. It doesn't matter if a primary residence, a seasonal vacation home or a rental fixer upper, purchasing real property is a detailed financial transaction that requires multiple people working in concert to make it all happen.
Practically all the people involved are very familiar. The real estate agent is the most known entity in the transaction. Then, the bank provides the financial capital needed to fund the deal. And the title company sees to it that all requirements of the transaction are completed and that a clear title transfers from the seller to the purchaser.
So, what party makes sure the value of the property is consistent with the amount being paid? In comes the appraiser. We provide an unbiased opinion 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 Hiland Appraisals, LLC will ensure, you as an interested party, are informed.
The inspection is where an appraisal starts
To determine the true status of the property, it's our duty to first perform a thorough inspection. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed are present and are in the condition a reasonable buyer would expect them to be. To ensure the stated square footage has not been misrepresented and convey the layout of the property, the inspection often includes creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious amenities - or defects - that would have an impact on the value of the property.
Once the site has been inspected, we use 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, we analyze information on local construction costs, the cost of labor and other elements to derive how much it would cost to construct a property nearly identical to the one being appraised. This value commonly sets the maximum on what a property would sell for. It's also the least used method.
Appraisers become very familiar with the neighborhoods in which they work. They thoroughly understand the value of specific features to the people of that area. Then, the appraiser researches recent transactions in the vicinity and finds properties which are 'comparable' to the home in question. 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 add or subtract from each comparable's sales price 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 Hiland Appraisals, LLC, we are experts in knowing the worth of particular items in Lansing and Ashe County neighborhoods. This approach to value is commonly given the most consideration when an appraisal is for a real estate sale.
Valuation Using the Income Approach
A third way of valuing a house is sometimes employed when an area has a reasonable number of renter occupied properties. In this situation, the amount of revenue the property generates is factored in with income produced by nearby properties to derive the current value.
The Bottom Line
Analyzing the data from all approaches, the appraiser is then ready to put down an estimated market value for the subject property. The estimate of value on the appraisal report is not necessarily what's being paid for the property even though it is likely the best indication of a property's valueThere 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 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. At the end of the day, an appraiser from Hiland Appraisals, LLC will help you attain the most fair and balanced property value, so you can make the most informed real estate decisions.