A Description of the Appraisal Process
A home purchase can be the biggest financial decision many of us may ever consider. Whether it's a primary residence, a seasonal vacation property or one of many rentals, the purchase of real property is a complex financial transaction that requires multiple people working in concert to see it through.
Practically all the participants are very familiar. The real estate agent is the most recognizable entity in the exchange. Then, the mortgage company provides the money needed to fund the transaction. The title company sees to it that all aspects of the transaction are completed and that the title is clear to transfer to the buyer from the seller.
So, who's responsible for making sure the value of the property is consistent with the purchase price? In comes the appraiser. 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 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 duty to first perform a thorough inspection. We must see features hands on, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they truly are there and are in the condition a typical buyer would expect them to be. To make sure the stated size of the property is accurate and convey the layout of the home, the inspection often includes creating a sketch of the floorplan. Most importantly, we identify any obvious amenities - or defects - that would affect the value of the house.
Next, after the inspection, we use two or three approaches to determining the value of real property: sales comparison and, in the case of a rental property, an income approach.
Here, the appraiser analyzes information on local building costs, the cost of labor and other factors to calculate how much it would cost to replace the property being appraised. This value commonly sets the upper limit 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 innately understand the value of particular features to the people of that area. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are 'comparable' to the property being appraised. By assigning a dollar value to certain items such as upgraded appliances, extra 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 might sell for can only be determined once all differences between the comps and the subject have been evaluated. When it comes to knowing the true worth of features of homes in Babylon and Suffolk, P.M. Appraisals, Inc. is your local authority. This approach to value is typically given the most importance when an appraisal is for a home sale.
Valuation Using the Income Approach
A third way of valuing a house is sometimes employed when a neighborhood has a reasonable number of renter occupied properties. In this scenario, the amount of income the real estate produces is taken into consideration along with income produced by comparable properties to give an indicator of the current value.
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 on the appraisal report is not necessarily the final sales price even though it is likely the best indication of a property's valueThere are always mitigating factors such as seller motivation, 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 case they had to put the property on the market again. At the end of the day, an appraiser from P.M. Appraisals, Inc. will guarantee you discover the most accurate property value, so you can make the most informed real estate decisions.