Decoding the Appraisal Process
A home purchase can be the most important financial decision many might ever consider. It doesn't matter if a main residence, an additional vacation property or a rental fixer upper, purchasing real property is an involved financial transaction that requires multiple people working in concert to make it all happen.
You're likely to be familiar with the parties having a role in the transaction. The real estate agent is the most known entity in the transaction. Next, the bank provides the money necessary to finance the exchange. And ensuring all details 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? This is where you meet the appraiser. We provide an unbiased opinion 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 Tri-County Appraisal Group, Inc. will ensure, you as an interested party, are informed.
Appraisals begin with the home inspection
To ascertain an accurate status of the property, it's our duty to first perform a thorough inspection. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really are present and are in the condition a reasonable person would expect them to be. To make sure the stated square footage is accurate and illustrate the layout of the home, the inspection often requires creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious features - 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 we use information on local construction costs, labor rates and other elements to determine how much it would cost to build a property nearly identical to the one being appraised. This figure often sets the upper limit on what a property would sell for. It's also the least used predictor of value.
Analyzing Comparable Sales
Appraisers are intimately familiar with the neighborhoods in which they appraise. They thoroughly understand the value of particular features to the homeowners of that area. Then, the appraiser looks up recent sales in close proximity to the subject and finds properties which are 'comparable' to the property in question. 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 more accurately match 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. When it comes to valuing features of homes in DEARBORN HTS and Wayne, Tri-County Appraisal Group, Inc. is your local authority. This approach to value is usually given the most consideration when an appraisal is for a home exchange.
Valuation Using the Income Approach
A third method of valuing a property is sometimes applied when an area has a measurable number of renter occupied properties. In this case, the amount of income the real estate yields is factored in with income produced by nearby properties to derive the current value.
The Bottom Line
Combining information from all approaches, the appraiser is then ready to state an estimated market value for the property at hand. It is important to note that while the appraised value is probably the strongest indication of what a property is worth, it probably will not be the price at which the property closes. 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 employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. It all comes down to this, an appraiser from Tri-County Appraisal Group, Inc. will help you discover the most accurate property value, so you can make profitable real estate decisions.