Decoding the Appraisal Process
Their home's purchase can be the most serious financial decision some people might ever consider. Whether it's a main residence, a second vacation property or one of many rentals, the purchase of real property is a complex transaction that requires multiple people working in concert to make it all happen.
The majority of the participants are quite familiar. The most familiar entity in the transaction is the real estate agent. Then, the bank provides the financial capital needed to finance the transaction. And ensuring all areas of the exchange are completed and that a clear title passes from the seller to the buyer is the title company.
So, what party makes sure the value of the property is in line with the amount being paid? In comes the appraiser. We provide an unbiased opinion of what a buyer could expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from RJE Real Estate Appraisal Service will ensure, you as an interested party, are informed.
Appraisals begin with the home inspection
Our first task at RJE Real Estate Appraisal Service is to inspect the property to determine its true status. We must see features hands on, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed are there and are in the shape a typical person would expect them to be. To ensure the stated size of the property is accurate and illustrate the layout of the property, the inspection often entails creating a sketch of the floorplan. Most importantly, we look for any obvious features - or defects - that would have an impact on the value of the house.
After the inspection, we use two or three approaches to determining the value of real property: paired sales analysis and, in the case of a rental property, an income approach.
Here, the appraiser pulls information on local construction costs, the cost of labor and other elements to figure out how much it would cost to replace the property being appraised. This value commonly sets the upper limit on what a property would sell for. The cost approach is also the least used method.
Analyzing Comparable Sales
Appraisers are intimately familiar with the subdivisions in which they work. They innately understand the value of particular features to the homeowners of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the real estate in question. By assigning a dollar value to 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.
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 Saline and Washtenaw, RJE Real Estate Appraisal Service can't be beat. This approach to value is typically awarded the most weight when an appraisal is for a home exchange.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - we may use a third way of valuing a house. In this situation, the amount of revenue the property yields is taken into consideration along with other rents in the area for comparable properties to derive 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 subject property. It is important to note that while this amount is probably the most reliable indication of what a house is worth, it probably will not be the price at which the property closes. Depending on the specific 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 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 RJE Real Estate Appraisal Service will help you get the most accurate property value, so you can make wise real estate decisions.