What Is an Appraisal?
Getting a home can be the largest investment some of us might ever encounter. It doesn't matter if a primary residence, an additional vacation property or a rental fixer upper, purchasing real property is a detailed transaction that requires multiple people working in concert to see it through.
It's likely you are familiar with the parties taking part in the transaction. The most familiar entity in the transaction is the real estate agent. Then, the lender provides the money required to fund the deal. And ensuring all details of the exchange are completed and that the title is clear to transfer from the seller to the buyer is the title company.
So, what party is responsible for making sure the value of the property is in line with the purchase price? 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 Larson Associates, LLC will ensure, you as an interested party, are informed.
The inspection is where an appraisal starts
Our first duty at Larson Associates, LLC is to inspect the property to determine its true status. We must see features first hand, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they indeed are present and are in the condition a reasonable person would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is proper and illustrating the layout of the property. Most importantly, we look for any obvious amenities - or defects - that would affect the value of the house.
After the inspection, an appraiser uses 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 the appraiser analyzes information on local construction costs, the cost of labor and other factors to figure out how much it would cost to construct a property similar to the one being appraised. This estimate usually sets the maximum on what a property would sell for. The cost approach is also the least used method.
Appraisers are intimately familiar with the neighborhoods in which they appraise. They thoroughly understand the value of specific features to the people of that area. Then, the appraiser researches recent sales in the vicinity and finds properties which are 'comparable' to the real estate at hand. Using knowledge of the value of certain items such as square footage, extra 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 portray the features of subject.
After all differences have been accounted for, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. When it comes to valuing features of homes in Stratford and Fairfield, Larson Associates, LLC is your local authority. The sales comparison approach to value is commonly given the most importance when an appraisal is for a home exchange.
Valuation Using the Income Approach
A third method of valuing real estate is sometimes employed when an area has a measurable number of renter occupied properties. In this case, the amount of income the property generates is factored in with other rents in the area for comparable properties to derive the current value.
The Bottom Line
Analyzing the data from all approaches, the appraiser is then ready to put down an estimated market value for the property at hand. The estimate of value at the bottom of the appraisal report is not always what's being paid for the property even though it is likely the best indication of what a property is worth. It's not uncommon for prices to be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. 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 Larson Associates, LLC will help you discover the most fair and balanced property value, so you can make the most informed real estate decisions.