What Goes Into an Appraisal?
Purchasing real estate is the most significant financial decision most of us will ever encounter. Whether it's a main residence, an additional vacation property or one of many rentals, purchasing real property is a complex financial transaction that requires multiple people working in concert to see it through.
Most people are familiar with the parties having a role in the transaction. The real estate agent is the most familiar face in the exchange. Next, the bank provides the money needed to finance the exchange. And ensuring all requirements of the exchange are completed and that the title is clear to pass to the buyer from the seller is the title company.
So, what party makes sure the value of the real estate is in line with the amount being paid? This is where you meet the appraiser. We provide an unbiased opinion of what a buyer might 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 REMACE, LTD. will ensure, you as an interested party, are informed.
The inspection is where an appraisal begins
Our first duty at REMACE, LTD. 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, 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 property, ensuring the square footage is correct and illustrating the layout of the property. Most importantly, we look for any obvious features - or defects - that would have an impact on the value of the property.
Next, after the inspection, an appraiser uses two or three approaches to determining the value of the property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.
Here, we gather information on local construction costs, labor rates and other elements to ascertain how much it would cost to build a property nearly identical to the one being appraised. This value often sets the maximum on what a property would sell for. The cost approach is also the least used method.
Appraisers get to know the neighborhoods in which they appraise. They thoroughly understand the value of particular features to the homeowners of that area. Then, the appraiser looks up recent sales in the area and finds properties which are 'comparable' to the home being appraised. By assigning a dollar value to certain items such as square footage, additional bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject property.
A true estimate of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. At REMACE, LTD., we are experts when it comes to knowing the worth of real estate features in York and York County neighborhoods. This approach to value is typically awarded the most consideration when an appraisal is for a home purchase.
Valuation Using the Income Approach
A third way of valuing approach to value is sometimes used when an area has a reasonable number of renter occupied properties. In this case, the amount of income the property yields is factored in with other rents in the area for comparable properties to determine the current value.
Coming Up With The Final Value
Combining information from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. The estimate of value on the appraisal report is not necessarily the final sales price even though it is likely the best indication of a property's valueThere are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust the final price up or down. 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. Here's what it all boils down to, an appraiser from REMACE, LTD. will help you get the most fair and balanced property value, so you can make profitable real estate decisions.