Real Property Appraisals: A Primer
Purchasing a home can be the most significant transaction some people will ever make. Whether it's where you raise your family, a second vacation property or a rental fixer upper, the purchase of real property is a detailed transaction that requires multiple parties to make it all happen.
The majority of the participants are very familiar. The real estate agent is the most recognizable person in the exchange. Then, the bank provides the financial capital required to finance the deal. And ensuring all requirements of the transaction are completed and that a clear title passes to the buyer from the seller is the title company.
So, who's responsible for making sure the value of the property is consistent with the amount being paid? In comes the appraiser. We provide an unbiased opinion of what a buyer could expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Crescent Appraisal Group, Inc. will ensure, you as an interested party, are informed.
Inspecting the subject property
Our first responsibility at Crescent Appraisal Group, Inc. is to inspect the property to ascertain its true status. We must see features hands on, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they indeed exist and are in the shape a reasonable buyer 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 have an impact on the value of the house.
Back at the office, we use two or three approaches to determining the value of the property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.
Here, the appraiser pulls information on local building costs, the cost of labor and other elements to derive how much it would cost to replace the property being appraised. This estimate 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 can tell you a lot about the communities in which they work. They innately understand the value of certain features to the homeowners of that area. Then, the appraiser researches recent transactions in close proximity to the subject and finds properties which are 'comparable' to the real estate at hand. By assigning a dollar value to certain items such as upgraded appliances, extra bathrooms, additional living area, quality of construction, lot size, we adjust the comparable properties so that they are more accurately in line with the features of subject property.
In the end, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At Crescent Appraisal Group, Inc., we are experts when it comes to knowing the worth of particular items in Metairie and Jefferson County neighborhoods. The sales comparison approach to value is commonly given the most consideration when an appraisal is for a real estate sale.
Valuation Using the Income Approach
A third way of valuing a property is sometimes applied when a neighborhood has a measurable number of renter occupied properties. In this situation, the amount of revenue the property yields is factored in with income produced by neighboring properties to derive the current value.
Arriving at a Value Conclusion
Examining the data from all approaches, the appraiser is then ready to stipulate an estimated market value for the property in question. Note: While this amount is probably the most accurate indication of what a house is worth, it may not be the final sales price. 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'. Regardless, the appraised value is typically used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. Here's what it all boils down to, an appraiser from Crescent Appraisal Group, Inc. will help you discover the most accurate property value, so you can make the most informed real estate decisions.