What Is an Appraisal?
A home purchase is the largest investment many of us may ever make. It doesn't matter if a primary residence, an additional vacation property or an investment, the purchase of real property is a complex financial transaction that requires multiple people working in concert to pull it all off.
You're probably familiar with the parties having a role in the transaction. The real estate agent is the most familiar entity in the transaction. Then, the bank provides the money required to bankroll the exchange. And ensuring all areas of the transaction are completed and that a clear title passes from the seller to the purchaser is the title company.
So, who's responsible for making sure the value of the real estate is in line with the purchase price? This is where you meet the appraiser. We provide an unbiased estimate 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 Ryan Realty Services Ltd. will ensure, you as an interested party, are informed.
Appraisals start with the inspection
Our first task at Ryan Realty Services Ltd. is to inspect the property to ascertain its true status. We must see features hands on, 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. The inspection often includes a sketch of the floorplan, ensuring the square footage is correct and illustrating the layout of the property. Most importantly, the appraiser identifies any obvious amenities - or defects - that would have an impact on the value of the house.
Once the site has been inspected, 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 gather information on local construction costs, the cost of labor and other factors to ascertain how much it would cost to construct a property nearly identical to the one being appraised. This estimate commonly sets the upper limit on what a property would sell for. The cost approach is also the least used predictor of value.
Analyzing Comparable Sales
Appraisers get to know the subdivisions in which they appraise. They innately understand the value of specific features to the residents of that area. Then, the appraiser looks up recent sales in the vicinity and finds properties which are 'comparable' to the real estate being appraised. Using knowledge of the value of certain items such as upgraded appliances, extra bathrooms, additional living area, quality of construction, lot size, we adjust the comparable properties so that they more accurately portray the features of subject.
An opinion of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. At Ryan Realty Services Ltd., we are an authority in knowing the worth of particular items in Ennismore and none County neighborhoods. This approach to value is usually given the most consideration when an appraisal is for a home purchase.
Valuation Using the Income Approach
A third method of valuing approach to value is sometimes used when an area has a reasonable number of rental properties. In this situation, the amount of revenue the property generates is factored in with other rents in the area for comparable properties to derive the current value.
The Bottom Line
Combining information from all applicable approaches, the appraiser is then ready to state an estimated market value for the property in question. The estimate of value on the appraisal report is not necessarily the final sales price even though it is likely the best indication of what a property is worth. Depending on the individual circumstances 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.Regardless, the appraised value is often employed as a guideline for lenders who don't want to loan a buyer more money than they could get back in case they had to put the property on the market again. Here's what it all boils down to, an appraiser from Ryan Realty Services Ltd. will help you attain the most fair and balanced property value, so you can make profitable real estate decisions.