Real Property Appraisals: A Primer
Their home's purchase can be the biggest investment some may ever make. Whether it's a main residence, an additional vacation home or an investment, purchasing real property is a detailed transaction that requires multiple people working in concert to make it all happen.
Practically all the parties participating are very familiar. The most known entity in the transaction is the real estate agent. Then, the mortgage company provides the money necessary to fund the deal. And ensuring all requirements of the transaction are completed and that the title is clear to pass to the buyer from the seller is the title company.
So, who makes sure the real estate is worth the amount being paid? In comes 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 P.M. Appraisals, Inc. will ensure, you as an interested party, are informed.
Inspecting the subject property
To ascertain the true status of the property, it's our responsibility to first perform a thorough inspection. We must actually view 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 shape a typical person 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, we identify any obvious amenities - or defects - that would affect the value of the house.
Following the inspection, 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 analyze information on local construction costs, the cost of labor and other elements to determine how much it would cost to construct a property comparable to the one being appraised. This figure commonly sets the maximum on what a property would sell for. It's also the least used predictor of value.
Analyzing Comparable Sales
Appraisers can tell you a lot about the subdivisions in which they work. They innately understand the value of particular features to the homeowners of that area. Then, the appraiser looks up recent transactions in the vicinity and finds properties which are 'comparable' to the subject at hand. Using knowledge of the value of certain items such as square footage, additional bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we add or subtract from each comparable's sales price so that they more accurately match the features of subject.
A valid estimate of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. At P.M. Appraisals, Inc., we are an authority in knowing the value of particular items in Babylon and Suffolk County neighborhoods. This approach to value is usually awarded the most weight when an appraisal is for a home purchase.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - we may use a third way of valuing a property. In this situation, the amount of income the property produces is taken into consideration along with income produced by similar properties to give an indicator of the current value.
Coming Up With The Final Value
Examining 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 reliable indication of what a property is worth, it probably will not be the final sales price. Prices can always be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. Regardless, the appraised value is typically used as a guideline for lenders who don't want to loan a buyer more money than they could get back in case they had to sell the property again. It all comes down to this, an appraiser from P.M. Appraisals, Inc. will guarantee you discover the most accurate property value, so you can make profitable real estate decisions.