What Goes Into an Appraisal?
Acquiring real estate is the largest financial decision some of us could ever consider. It doesn't matter if a primary residence, an additional vacation property or an investment, purchasing real property is a complex transaction that requires multiple people working in concert to pull it all off.
Practically all the parties participating are quite familiar. The most familiar face in the transaction is the real estate agent. Next, the lender provides the financial capital necessary to bankroll the deal. And ensuring all aspects of the sale are completed and that a clear title transfers to the buyer from the seller is the title company.
So, who's responsible for making sure the property is worth the purchase price? This is where you meet the appraiser. We provide an unbiased estimate 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 Shamrock Appraisals, Inc. will ensure, you as an interested party, are informed.
The inspection is where an appraisal begins
Our first task at Shamrock Appraisals, Inc. is to inspect the property to ascertain its true status. We must actually see aspects of the property, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly are there and are in the condition a reasonable person would expect them to be. To ensure the stated square footage is accurate and convey the layout of the property, the inspection often entails creating a sketch of the floorplan. Most importantly, we look for any obvious amenities - or defects - that would have an impact on the value of the property.
Next, after the inspection, we use 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 gathers information on local building costs, the cost of labor and other factors to determine how much it would cost to build a property nearly identical to the one being appraised. This figure commonly sets the maximum on what a property would sell for. The cost approach is also the least used method.
Analyzing Comparable Sales
Appraisers become very familiar with 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 sales 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 upgraded appliances, extra bathrooms, additional living area, quality of construction, lot size, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject property.
Once all necessary adjustments have been made, 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 when it comes to knowing the value of particular items in Tuscaloosa and Tuscaloosa County neighborhoods. The sales comparison approach to value is commonly given the most consideration when an appraisal is for a home sale.
Valuation Using the Income Approach
A third way of valuing real estate is sometimes employed when an area has a measurable number of renter occupied properties. In this scenario, the amount of income the property generates is factored in with income produced by nearby properties to derive the current value.
Coming Up With The Final Value
Combining information from all applicable approaches, the appraiser is then ready to document an estimated market value for the property in question. Note: While this amount is probably the best indication of what a property is worth, it probably will not be the price at which the property closes. Depending on the specific situations 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.But the appraised value is often 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. At the end of the day, an appraiser from Shamrock Appraisals, Inc. will help you discover the most accurate property value, so you can make wise real estate decisions.