What are the components of an appraisal?One's home purchase can be the most serious financial decision some of us will ever make. Whether it's a main residence, a seasonal vacation property or one of many rentals, the purchase of real property is a complex financial transaction that requires multiple parties to see it through.
Most people are familiar with the parties having a role in the transaction. The most familiar person in the transaction is the real estate agent. Then, the mortgage company provides the money needed to fund the deal. The title company ensures that all areas of the transaction are completed and that the title is clear to transfer to the buyer from the seller.
So what party is responsible for making sure the property is consistent with the amount being paid? This is where you meet the appraiser. We provide an unbiased opinion 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 professional Arkansas licensed appraiser from Wilson Appraisal Group, LLC will ensure you as an interested party are informed.
Appraisals begin with the inspectionTo 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, and so on, to ensure they really exist and are in the condition a reasonable buyer would expect them to be. To ensure the stated size of the property has not been misrepresented and convey the layout of the house, the inspection often includes creating a sketch of the floor plan. Most importantly, the appraiser identifies any obvious features - or defects - that would have an impact on the value of the house.
Following the inspection, we use two or three approaches when determining the value of real property: sales comparison and, in the case of a rental property, an income approach.
Cost ApproachThis is where the appraiser uses information on local building costs, the cost of labor and other elements to calculate how much it would cost to replace the property being appraised. This estimate often sets the maximum on what a property would sell for. The cost approach is also the least used method.
Paired Sales AnalysisAppraisers are intimately familiar with the communities in which they appraise. We thoroughly understand the value of certain features to the people of that area. Then, the appraiser researches recent transactions in the neighborhood and finds properties which are 'comparable' to the property 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 adjust the comparable properties so that they are more accurately in line with the features of subject property.
Valuation Using the Income ApproachA third method of valuing a property is sometimes employed when an area has a reasonable number of renter occupied properties. In this situation, the amount of revenue the property produces is factored in with other rents in the area for comparable properties to determine the current value.
Arriving at a Value ConclusionAnalyzing the data from all approaches, the appraiser is then ready to state an estimated market value for the property in question. Note: While this amount is probably the most reliable indication of what a property would sell for in an open market, it probably will not be the price at which the property closes. 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 typically employed as a guideline for lenders who don't want to loan a buyer more money than the property would likely sell for in an open marketplace. Here's what it all boils down to: An appraiser from Wilson Appraisal Group, LLC will guarantee you attain the most accurate property value, so you can make wise real estate decisions.
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