Home Appraisals: A Primer
A home purchase can be the largest transaction many people might ever consider. It doesn't matter if a primary residence, a second vacation property or one of many rentals, purchasing real property is a complex financial transaction that requires multiple parties to pull it all off.
Most people are familiar with the parties taking part in the transaction. The real estate agent is the most known face in the exchange. Next, the mortgage company provides the money necessary to finance the deal. The title company sees to it that all aspects of the exchange are completed and that the title is clear to pass from the seller to the buyer.
So, who makes sure the property is worth the amount being paid? 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 parcel of real estate, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Fairway Appraisal Services will ensure, you as an interested party, are informed.
Appraisals start with the inspection
Our first responsibility at Fairway Appraisal Services is to inspect the property to determine its true status. We must actually see aspects of the property, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they indeed exist 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 proper and illustrating the layout of the property. Most importantly, the appraiser looks for any obvious features - or defects - that would have an impact on the value of the house.
Next, after the inspection, an appraiser uses two or three approaches to determining the value of the property: sales comparison and, in the case of a rental property, an income approach.
Here, the appraiser pulls information on local construction costs, the cost of labor and other factors to determine how much it would cost to construct a property nearly identical to the one being appraised. This estimate often sets the maximum on what a property would sell for. It's also the least used method.
Appraisers get to know the subdivisions in which they work. They thoroughly understand the value of specific features to the residents of that area. Then, the appraiser researches recent sales in the neighborhood and finds properties which are 'comparable' to the home in question. Using knowledge of the value of certain items such as upgraded appliances, additional bathrooms, additional living area, quality of construction, lot size, we add or subtract from each comparable's sales price so that they more accurately match 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. When it comes to putting a value on features of homes in Brookfield and Waukesha, Fairway Appraisal Services is your local authority. The sales comparison approach to value is most often given the most weight when an appraisal is for a home exchange.
Valuation Using the Income Approach
A third method of valuing approach to value is sometimes applied when a neighborhood has a reasonable number of renter occupied properties. In this scenario, the amount of income the property produces is factored in with income produced by nearby properties to give an indicator of the current value.
The Bottom Line
Examining the data from all applicable approaches, the appraiser is then ready to document an estimated market value for the subject property. It is important to note that while the appraised value is probably the most reliable indication of what a property is worth, it may not be the final sales price. Depending on the specific 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.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. It all comes down to this, an appraiser from Fairway Appraisal Services will guarantee you attain the most fair and balanced property value, so you can make profitable real estate decisions.