What Are the Parts of an Appraisal?
Getting a home is the largest transaction most people may ever make. Whether it's a main residence, a seasonal vacation property or an investment, the purchase of real property is an involved transaction that requires multiple people working in concert to pull it all off.
It's likely you are familiar with the parties taking part in the transaction. The most recognizable entity in the transaction is the real estate agent. Then, the bank provides the financial capital necessary to bankroll the deal. And ensuring all aspects of the sale are completed and that the title is clear to transfer from the seller to the buyer is the title company.
So, what party makes sure the property is worth the purchase price? 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 property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Vinson Appraisal Services will ensure, you as an interested party, are informed.
Appraisals start with the property inspection
To determine the true status of the property, it's our responsibility to first complete a thorough inspection. 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 condition a typical person would expect them to be. To ensure the stated square footage has not been misrepresented and illustrate the layout of the house, the inspection often requires creating a sketch of the floorplan. Most importantly, we look for any obvious amenities - or defects - that would affect the value of the property.
Once the site has been inspected, an appraiser uses 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 we use information on local construction costs, labor rates and other elements to derive how much it would cost to replace the property 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.
Paired Sales Analysis
Appraisers are intimately familiar with the neighborhoods in which they appraise. They thoroughly understand the value of specific features to the people of that area. Then, the appraiser looks up recent transactions in the area and finds properties which are 'comparable' to the subject at hand. 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 match the features of subject property.
In the end, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At Vinson Appraisal Services, we are experts in knowing the worth of real estate features in Forsyth and Monroe County neighborhoods. This approach to value is typically awarded the most importance when an appraisal is for a home exchange.
Valuation Using the Income Approach
A third way of valuing real estate is sometimes employed when an area has a reasonable number of rental properties. In this case, the amount of revenue the property generates is factored in with other rents in the area for comparable properties to determine the current value.
Putting It All Together
Combining information from all applicable approaches, the appraiser is then ready to document an estimated market value for the property in question. The estimate of value at the bottom of the appraisal report is not always the final sales price even though it is likely the best indication of a property's valueIt's not uncommon for prices to be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. But 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. At the end of the day, an appraiser from Vinson Appraisal Services will help you attain the most accurate property value, so you can make profitable real estate decisions.