Home Appraisals: A Primer
Acquiring a home is the most serious financial decision many of us may ever consider. It doesn't matter if where you raise your family, a seasonal vacation property or one of many rentals, purchasing real property is a complex financial transaction that requires multiple people working in concert to see it through.
Most people are familiar with the parties having a role in the transaction. The most known person in the exchange is the real estate agent. Next, the bank provides the money needed to fund the transaction. And ensuring all details of the sale are completed and that the title is clear to pass from the seller to the buyer is the title company.
So, what party is responsible for making sure the value of the property is in line with the purchase price? This is where you meet the appraiser. We provide an unbiased opinion of what a buyer might 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.
Inspecting the subject property
To ascertain the true status of the property, it's our responsibility to first complete a thorough inspection. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they indeed are there and are in the shape a reasonable person would expect them to be. To make sure the stated size of the property has not been misrepresented and illustrate the layout of the home, the inspection often entails creating a sketch of the floorplan. Most importantly, the appraiser looks for any obvious features - or defects - that would have an impact on the value of the property.
Once the site has been inspected, 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 gather information on local building costs, labor rates and other elements to calculate how much it would cost to build a property similar to the one being appraised. This value often sets the upper limit on what a property would sell for. The cost approach is also the least used predictor of value.
Paired Sales Analysis
Appraisers become very familiar with the neighborhoods in which they work. They thoroughly understand the value of specific features to the homeowners of that area. Then, the appraiser researches recent sales in the area and finds properties which are 'comparable' to the property being appraised. Using knowledge of the value of certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or additional 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 REMACE, LTD., we are experts when it comes to knowing the value of particular items in York and York County neighborhoods. The sales comparison approach to value is commonly given the most weight when an appraisal is for a real estate sale.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - we may use an additional way of valuing a house. In this case, the amount of revenue the property yields is taken into consideration along with income produced by similar properties to determine the current value.
The Bottom Line
Examining the data from all approaches, the appraiser is then ready to document an estimated market value for the subject property. The estimate of value at the bottom of the appraisal report is not necessarily the final sales price even though it is likely the best indication of a property's valueDepending on the individual 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 employed 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 put the property on the market again. 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 profitable real estate decisions.