What Goes Into an Appraisal?
Their home's purchase can be the most important transaction most of us might ever encounter. Whether it's a main residence, a second vacation home or one of many rentals, the purchase of real property is an involved transaction that requires multiple people working in concert to pull it all off.
Most people are familiar with the parties having a role in the transaction. The real estate agent is the most recognizable person in the exchange. Next, the mortgage company provides the financial capital required to fund the transaction. And ensuring all areas of the sale are completed and that a clear title transfers from the seller to the buyer is the title company.
So, what party makes sure the real estate is worth the amount being paid? 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 Advantage Appraisal Inc. (207) 794-2018 will ensure, you as an interested party, are informed.
Inspecting the subject property
Our first task at Advantage Appraisal Inc. (207) 794-2018 is to inspect the property to ascertain its true status. We must physically view aspects of the property, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they truly are there and are in the shape a reasonable person would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is correct and illustrating the layout of the property. Most importantly, we look for any obvious amenities - or defects - that would have an impact on the value of the house.
Once the site has been inspected, an appraiser uses two or three approaches to determining the value of real property: sales comparison and, in the case of a rental property, an income approach.
This is where the appraiser pulls information on local building costs, labor rates and other factors to figure out how much it would cost to replace the property being appraised. This value often 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 can tell you a lot about the neighborhoods in which they work. They thoroughly understand the value of particular features to the residents of that area. Then, the appraiser researches recent sales in the vicinity and finds properties which are 'comparable' to the subject at hand. 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 property.
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 Advantage Appraisal Inc. (207) 794-2018, we are an authority in knowing the value of particular items in Lincoln and Penobscot County neighborhoods. The sales comparison approach to value is typically awarded the most importance when an appraisal is for a real estate sale.
Valuation Using the Income Approach
A third way of valuing approach to value is sometimes employed when a neighborhood has a measurable number of renter occupied properties. In this situation, the amount of income the property generates is taken into consideration along with other rents in the area for comparable properties to give an indicator of the current value.
Putting It All Together
Combining information from all approaches, the appraiser is then ready to put down an estimated market value for the property at hand. 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. 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. But the appraised value is typically used 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 put the property on the market again. It all comes down to this, an appraiser from Advantage Appraisal Inc. (207) 794-2018 will guarantee you attain the most fair and balanced property value, so you can make the most informed real estate decisions.