What Are the Parts of an Appraisal?
Their home's purchase can be the most significant financial decision some of us might ever consider. Whether it's a main residence, an additional vacation property or one of many rentals, purchasing real property is a detailed financial transaction that requires multiple people working in concert to see it through.
Practically all the people involved are quite familiar. The most familiar face in the transaction is the real estate agent. Next, the mortgage company provides the money required to fund the deal. And ensuring all areas of the sale are completed and that the title is clear to transfer from the seller to the purchaser is the title company.
So, who makes sure the value of the real estate is consistent with 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 property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Michael Manley Appraisals LLC will ensure, you as an interested party, are informed.
The inspection is where an appraisal starts
To determine an accurate status of the property, it's our responsibility to first complete a thorough inspection. We must actually view features, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they really exist and are in the condition 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 looks for any obvious amenities - or defects - that would have an impact on the value of the property.
Back at the office, an appraiser uses 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.
This is where we pull information on local construction costs, labor rates and other factors to derive how much it would cost to replace the property being appraised. This estimate commonly sets the upper limit on what a property would sell for. It's also the least used method.
Appraisers are intimately familiar with the communities in which they appraise. They innately understand the value of certain features to the residents of that area. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are 'comparable' to the subject in question. Using knowledge of the value of certain items such as square footage, additional bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we adjust the comparable properties so that they are more accurately in line with the features of subject property.
A valid 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 associating a value with features of homes in Littleton and Arapahoe, Michael Manley Appraisals LLC is your local authority. The sales comparison approach to value is most often awarded the most importance when an appraisal is for a real estate purchase.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - the appraiser may use a third way of valuing a house. In this case, the amount of revenue the real estate generates is factored in with income produced by comparable properties to give an indicator of the current value.
Arriving at a Value Conclusion
Combining information from all approaches, the appraiser is then ready to put down an estimated market value for the subject property. Note: While this amount is probably the most accurate indication of what a house is worth, it probably will not be the price at which the property closes. There are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust an offer or listing 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. Here's what it all boils down to, an appraiser from Michael Manley Appraisals LLC will help you discover the most accurate property value, so you can make profitable real estate decisions.