Real Estate Appraisals: A Primer
Buying real estate can be the most important financial decision many of us could ever encounter. Whether it's where you raise your family, a seasonal vacation home or an investment, the purchase of real property is a detailed financial transaction that requires multiple parties to make it all happen.
You're probably familiar with the parties having a role in the transaction. The most recognizable face in the transaction is the real estate agent. Then, the mortgage company provides the money needed to fund the transaction. And ensuring all details of the transaction are completed and that the title is clear to transfer 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 the appraiser comes in. We provide an unbiased estimate 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 ValPro Appraisal LLC will ensure, you as an interested party, are informed.
The inspection is where an appraisal starts
Our first duty at ValPro Appraisal LLC is to inspect the property to determine its true status. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they indeed exist and are in the shape a typical person would expect them to be. To ensure the stated size of the property is accurate and document the layout of the house, the inspection often entails creating a sketch of the floorplan. Most importantly, we identify any obvious features - or defects - that would have an impact on the value of the property.
After the inspection, we use 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.
This is where we gather information on local building costs, labor rates and other elements to ascertain how much it would cost to replace the property being appraised. This value commonly sets the upper limit on what a property would sell for. The cost approach is also the least used method.
Appraisers become very familiar with the subdivisions in which they work. They thoroughly understand the value of particular features to the people of that area. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are 'comparable' to the real estate being appraised. 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 add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject.
An opinion of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. At ValPro Appraisal LLC, we are an authority when it comes to knowing the worth of particular items in Cape Coral and Lee County neighborhoods. This approach to value is most often given the most weight when an appraisal is for a real estate exchange.
Valuation Using the Income Approach
A third way of valuing approach to value is sometimes applied when an area has a reasonable number of renter occupied properties. In this situation, the amount of revenue the real estate produces is taken into consideration along with other rents in the area for comparable properties to derive the current value.
Combining information from all applicable approaches, the appraiser is then ready to put down 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 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.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 the event they had to sell the property again. The bottom line is, an appraiser from ValPro Appraisal LLC will help you discover the most accurate property value, so you can make the most informed real estate decisions.