A home purchase can be the most significant transaction some could ever make. It doesn't matter if a main residence, a seasonal vacation property or one of many rentals, purchasing real property is a complex financial transaction that requires multiple parties to make it all happen.
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 lender provides the financial capital necessary to finance the transaction. The title company ensures that all requirements of the exchange are completed and that a clear title transfers from the seller to the buyer.
So, who's responsible for making sure the value of the real estate is consistent with the purchase price? In comes the appraiser. 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 Sirius Appraisal Services will ensure, you as an interested party, are informed.
The inspection is where an appraisal begins
To determine an accurate status of the property, it's our duty to first conduct a thorough inspection. We must actually view features, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really are present and are in the shape a typical buyer would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is proper and conveying the layout of the property. Most importantly, we identify any obvious features - or defects - that would affect the value of the property.
Following the inspection, an appraiser uses two or three approaches to determining the value of the property: paired sales analysis and, in the case of a rental property, an income approach.
Here, the appraiser analyzes information on local construction costs, labor rates and other elements to calculate how much it would cost to construct a property nearly identical to the one being appraised. This estimate usually sets the upper limit on what a property would sell for. It's also the least used predictor of value.
Analyzing Comparable Sales
Appraisers become very familiar with the communities in which they appraise. They innately understand the value of certain features to the residents of that area. Then, the appraiser researches recent sales in the area and finds properties which are 'comparable' to the subject in question. By assigning a dollar value to certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or extra storage space, we adjust the comparable properties so that they are more accurately in line with the features of subject.
A true estimate of what the subject might 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 in knowing the worth of particular items in Jamaica Estates and Queens County neighborhoods. The sales comparison approach to value is typically awarded the most consideration when an appraisal is for a real estate purchase.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - the appraiser may use an additional approach to value. In this case, the amount of income the real estate yields is factored in with other rents in the area for comparable properties to give an indicator of the current value.
The Bottom Line
Analyzing the data from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the property at hand. Note: While the appraised value is probably the most accurate indication of what a property is worth, it may not be the price at which the property closes. There are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust the final price up or down. Regardless, the appraised value is typically 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 sell the property again. It all comes down to this, an appraiser from Sirius Appraisal Services will guarantee you get the most accurate property value, so you can make the most informed real estate decisions.
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