Decoding the Appraisal Process
Buying real estate can be the most serious financial decision most people could ever consider. Whether it's where you raise your family, a second vacation home or a rental fixer upper, purchasing real property is an involved financial transaction that requires multiple people working in concert to see it through.
Most of the people participating are quite familiar. The real estate agent is the most familiar entity in the exchange. Next, the bank provides the money needed to finance the exchange. And ensuring all details of the transaction are completed and that a clear title transfers from the seller to the purchaser is the title company.
So, who's responsible for making sure the real estate is worth the purchase price? This is where you meet 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 RJE Real Estate Appraisal Service will ensure, you as an interested party, are informed.
Inspecting the subject property
Our first duty at RJE Real Estate Appraisal Service is to inspect the property to determine its true status. We must actually see features, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they indeed are present and are in the shape a typical person would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is accurate and illustrating the layout of the property. Most importantly, the appraiser identifies any obvious amenities - or defects - that would affect the value of the house.
Back at the office, 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 pull information on local construction costs, labor rates and other elements to determine how much it would cost to construct a property similar to the one being appraised. This value commonly sets the maximum on what a property would sell for. It's also the least used predictor of value.
Analyzing Comparable Sales
Appraisers become very familiar with the subdivisions in which they work. They thoroughly understand the value of particular features to the residents of that area. Then, the appraiser researches recent transactions in close proximity to the subject and finds properties which are 'comparable' to the real estate at hand. 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 might 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 worth of features of homes in Saline and Washtenaw, RJE Real Estate Appraisal Service can't be beat. The sales comparison approach to value is most often given the most importance when an appraisal is for a home purchase.
Valuation Using the Income Approach
A third method of valuing a property is sometimes employed when an area has a reasonable number of renter occupied properties. In this situation, the amount of income the real estate produces is taken into consideration along with income produced by comparable properties to determine the current value.
Coming Up With The Final Value
Examining the data from all approaches, the appraiser is then ready to document an estimated market value for the property in question. It is important to note that while this amount is probably the strongest indication of what a house is worth, it may not be the final sales price. It's not uncommon for prices to be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. But the appraised value is typically employed as a guideline for lenders who don't want to loan a buyer more money than they could recover in the event they had to put the property on the market again. Here's what it all boils down to, an appraiser from RJE Real Estate Appraisal Service will help you discover the most fair and balanced property value, so you can make profitable real estate decisions.