Home Appraisals: A Primer
Acquiring real estate can be the largest investment many of us may ever make. Whether it's a primary residence, a seasonal vacation property or a rental fixer upper, the purchase of real property is an involved transaction that requires multiple people working in concert to pull it all off.
Practically all the participants are very familiar. The real estate agent is the most known person in the transaction. Next, the lender provides the financial capital necessary to fund the deal. The title company makes sure that all requirements of the sale are completed and that a clear title transfers from the seller to the purchaser.
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 opinion of what a buyer might expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Sirius Appraisal Services will ensure, you as an interested party, are informed.
The inspection is where an appraisal starts
To ascertain the true status of the property, it's our responsibility to first complete a thorough inspection. We must physically view aspects of the property, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed are present and are in the shape a reasonable person would expect them to be. To make sure the stated size of the property has not been misrepresented and document the layout of the house, the inspection often includes creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious features - 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: paired sales analysis and, in the case of a rental property, an income approach.
This is where the appraiser uses information on local construction costs, labor rates and other factors to derive how much it would cost to replace the property being appraised. This figure commonly sets the maximum on what a property would sell for. It's also the least used method.
Appraisers are intimately familiar with the communities in which they appraise. They innately understand the value of specific 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 property in question. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, extra bathrooms or bedrooms, or quality of construction, 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 valid 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 Sirius Appraisal Services, we are an authority when it comes to knowing the worth of real estate features in Jamaica Estates and Queens County neighborhoods. This approach to value is typically awarded the most importance when an appraisal is for a real estate sale.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - we may use an additional approach to value. In this case, the amount of income the property yields is factored in with other rents in the area for comparable properties to derive the current value.
Putting It All Together
Analyzing the data from all approaches, the appraiser is then ready to document an estimated market value for the property at hand. Note: While the appraised value is probably the best indication of what a house is worth, it probably will not be the price at which the property closes. Prices 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 employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. The bottom line is, an appraiser from Sirius Appraisal Services will help you attain the most fair and balanced property value, so you can make wise real estate decisions.
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