A home purchase can be the most important financial decision some might ever encounter. Whether it's a main residence, a seasonal vacation property or a rental fixer upper, purchasing real property is a detailed financial transaction that requires multiple people working in concert to see it through.
Most of the parties participating are very familiar. The most known person in the transaction is the real estate agent. Then, the mortgage company provides the financial capital necessary to finance the transaction. The title company ensures that all areas of the sale are completed and that the title is clear to pass to the buyer from the seller.
So, what party makes sure the value of the property is consistent with the amount being paid? This is where the appraiser comes in. We provide an unbiased estimate 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 Advantage Appraisal Inc. (207) 794-2018 will ensure, you as an interested party, are informed.
Inspecting the subject property
To determine an accurate status of the property, it's our duty to first perform a thorough inspection. We must see features 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 reasonable buyer would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is correct and conveying 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 property.
Back at the office, we use two or three approaches to determining the value of the property: sales comparison and, in the case of a rental property, an income approach.
This is where we use information on local building costs, the cost of labor and other factors to determine how much it would cost to construct a property comparable to the one being appraised. This estimate 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 become very familiar with the neighborhoods in which they appraise. They innately understand the value of certain features to the residents of that area. Then, the appraiser researches recent transactions in the neighborhood and finds properties which are 'comparable' to the real estate in question. By assigning a dollar value to certain items such as square footage, additional bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we adjust the comparable properties so that they more accurately portray the features of subject.
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 Advantage Appraisal Inc. (207) 794-2018, we are experts in knowing the value of real estate features in Lincoln and Penobscot County neighborhoods. The sales comparison approach to value is most often awarded the most consideration when an appraisal is for a real estate sale.
Valuation Using the Income Approach
A third method of valuing real estate is sometimes used when a neighborhood has a reasonable number of renter occupied properties. In this case, the amount of income the property produces is taken into consideration along with other rents in the area for comparable properties to determine the current value.
Coming Up With The Final Value
Examining the data from all approaches, the appraiser is then ready to document an estimated market value for the property at hand. The estimate of value at the bottom of the appraisal report is not necessarily the final sales price even though it is likely the best indication of what a property is worth. 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.Regardless, the appraised value is often employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. At the end of the day, an appraiser from Advantage Appraisal Inc. (207) 794-2018 will guarantee you attain the most fair and balanced property value, so you can make profitable real estate decisions.