A home purchase can be the largest investment some of us could ever consider. Whether it’s a primary residence, a second vacation home or a rental fixer upper, purchasing real property is an involved transaction that requires multiple people working in concert to pull it all off.
The majority of the people participating are quite familiar. The real estate agent is the most known face in the exchange. Then, the mortgage company provides the financial capital required to finance the transaction. The title company makes sure that all areas of the sale are completed and that a clear title transfers from the seller to the purchaser.
To determine the true status of the property, it’s our duty to first conduct a thorough inspection. We must see features hands on, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly are present and are in the condition a reasonable person would expect them to be. To make sure the stated square footage has not been misrepresented and illustrate the layout of the house, the inspection often requires 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, we use two or three approaches to determining the value of real property: sales comparison and, in the case of a rental property, an income approach.
Here, the appraiser analyzes information on local construction costs, the cost of labor and other factors to calculate how much it would cost to replace the property being appraised. This figure usually sets the maximum on what a property would sell for. It’s also the least used predictor of value.
Appraisers can tell you a lot about the neighborhoods in which they appraise. They thoroughly understand the value of specific features to the homeowners of that area. Then, the appraiser looks up recent transactions in the neighborhood and finds properties which are ‘comparable’ to the home in question. 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 adjust the comparable properties so that they more accurately match the features of subject property.
After all differences have been accounted for, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. When it comes to putting a value on features of homes in Central Maryland, AppraisEZ, LLC is second to none. The sales comparison approach to value is commonly awarded the most weight when an appraisal is for a home purchase.
A third way of valuing real estate is sometimes employed when an area has a measurable number of renter occupied properties. In this case, the amount of revenue the real estate produces is factored in with income produced by neighboring properties to give an indicator of the current value.
Analyzing the data from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the property at hand. Note: While the appraised value is probably the most accurate indication of what a house is worth, it may not be the final sales price. There are always mitigating factors such as seller motivation, urgency or ‘bidding wars’ that may adjust the final price 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 the property is actually worth. The bottom line is, an appraiser from AppraisEZ, LLC will guarantee you discover the most accurate property value, so you can make profitable real estate decisions.