Real Property Appraisals: A Primer
A home purchase is the most serious investment many might ever make. Whether it's a primary residence, a seasonal vacation home or an investment, purchasing real property is a detailed financial transaction that requires multiple parties to see it through.
Most people are familiar with the parties taking part in the transaction. The most recognizable person in the exchange is the real estate agent. Next, the lender provides the financial capital required to fund the transaction. And the title company sees to it that all aspects of the transaction are completed and that the title is clear to pass from the seller to the purchaser.
So, what party is responsible for making sure the property is worth the purchase price? 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 REMACE, LTD. will ensure, you as an interested party, are informed.
The inspection is where an appraisal begins
Our first responsibility at REMACE, LTD. 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, amenities, etc., to ensure they truly are there and are in the condition a reasonable buyer would expect them to be. To ensure the stated square footage is accurate and convey the layout of the home, the inspection often entails creating a sketch of the floorplan. Most importantly, the appraiser looks for any obvious amenities - or defects - that would have an impact on the value of the property.
Following the inspection, we use two or three approaches to determining the value of real 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 construction costs, labor rates and other factors to determine how much it would cost to construct a property similar to the one being appraised. This estimate commonly sets the maximum on what a property would sell for. It's also the least used method.
Appraisers can tell you a lot about the subdivisions in which they appraise. They thoroughly understand the value of specific features to the homeowners of that area. Then, the appraiser looks up recent sales in the area and finds properties which are 'comparable' to the subject at hand. By assigning a dollar value to certain items such as fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, we adjust the comparable properties so that they are more accurately in line with the features of subject.
A true 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 knowing the true value of features of homes in York and York, REMACE, LTD. is second to none. The sales comparison approach to value is usually given the most importance when an appraisal is for a home purchase.
Valuation Using the Income Approach
A third way of valuing approach to value is sometimes used when a neighborhood has a measurable number of rental properties. In this scenario, the amount of income the real estate generates is factored in with income produced by comparable properties to derive the current value.
Combining information from all applicable 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 most accurate indication of what a property is worth, it probably will 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 often employed 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 REMACE, LTD. will help you discover the most fair and balanced property value, so you can make wise real estate decisions.