What Are the Parts of an Appraisal?
Acquiring real estate can be the most significant investment many people might ever consider. Whether it's where you raise your family, a seasonal vacation home or one of many rentals, purchasing real property is an involved financial transaction that requires multiple people working in concert to make it all happen.
The majority of the participants are quite familiar. The real estate agent is the most known face in the transaction. Then, the mortgage company provides the money required to finance the exchange. And ensuring all areas of the transaction are completed and that a clear title transfers to the buyer from the seller is the title company.
So, what party is responsible for making sure the property is worth the purchase price? In comes 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 Shamrock Appraisals, Inc. 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 conduct a thorough inspection. We must actually view features, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they truly exist and are in the shape a reasonable person would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is correct and illustrating the layout of the property. Most importantly, we identify any obvious features - or defects - that would affect the value of the property.
Once the site has been inspected, an appraiser uses two or three approaches to determining the value of real property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.
This is where the appraiser analyzes information on local construction costs, the cost of labor and other elements to ascertain how much it would cost to build a property comparable to the one being appraised. This figure often sets the maximum on what a property would sell for. It's also the least used method.
Analyzing Comparable Sales
Appraisers get to know the neighborhoods in which they work. They innately understand the value of specific features to the homeowners of that area. Then, the appraiser researches recent transactions in the area and finds properties which are 'comparable' to the home being appraised. Using knowledge of the value of certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or extra storage space, we adjust the comparable properties so that they are more accurately in line with the features of subject.
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. At Shamrock Appraisals, Inc., we are an authority in knowing the value of real estate features in Tuscaloosa and Tuscaloosa County neighborhoods. This approach to value is commonly awarded the most importance when an appraisal is for a home exchange.
Valuation Using the Income Approach
A third way of valuing approach to value is sometimes used when an area has a reasonable number of rental properties. In this case, the amount of income the real estate produces is taken into consideration along with other rents in the area for comparable properties to give an indicator of the current value.
The Bottom Line
Combining information from all approaches, the appraiser is then ready to document an estimated market value for the property at hand. The estimate of value at the bottom of the appraisal report is not necessarily what's being paid for the property even though it is likely the best indication of a property's valuePrices can always be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. Regardless, the appraised value is typically used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. At the end of the day, an appraiser from Shamrock Appraisals, Inc. will help you get the most fair and balanced property value, so you can make wise real estate decisions.