What Are the Components of an Appraisal?
A home purchase can be the most important transaction many could ever make. Whether it's a main residence, an additional vacation home or a rental fixer upper, purchasing real property is an involved transaction that requires multiple people working in concert to pull it all off.
The majority of the parties participating are very familiar. The real estate agent is the most known face in the exchange. Next, the mortgage company provides the financial capital necessary to fund the deal. And ensuring all details of the transaction 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 real estate is worth the purchase price? This is where the appraiser comes in. 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 Crescent Appraisal Group, Inc. will ensure, you as an interested party, are informed.
Appraisals start with the home inspection
Our first task at Crescent Appraisal Group, Inc. is to inspect the property to ascertain its true status. We must physically see aspects of the property, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they really are present and are in the shape a typical buyer would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is accurate and illustrating the layout of the property. Most importantly, the appraiser looks for any obvious features - or defects - that would affect the value of the property.
Back at the office, we use two or three approaches to determining the value of real property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.
Here, we use information on local construction costs, labor rates and other factors to ascertain how much it would cost to replace the property being appraised. This figure usually sets the upper limit on what a property would sell for. It's also the least used method.
Paired Sales Analysis
Appraisers get to know the neighborhoods in which they work. They thoroughly understand the value of particular features to the homeowners of that area. Then, the appraiser researches recent transactions in the vicinity and finds properties which are 'comparable' to the property at hand. By assigning a dollar value to certain items such as fireplaces, room layout, appliance upgrades, extra bathrooms or bedrooms, or quality of construction, we adjust the comparable properties so that they are more accurately in line with the features of subject property.
Once all necessary adjustments have been made, 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 value of real estate features in Metairie and Jefferson County neighborhoods. The sales comparison approach to value is most often given the most consideration when an appraisal is for a real estate exchange.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - the appraiser may use a third method of valuing a house. In this case, the amount of revenue the property produces is taken into consideration along with income produced by comparable properties to derive the current value.
Examining the data from all approaches, the appraiser is then ready to document an estimated market value for the property in question. It is important to note that while this amount is probably the best indication of what a property is worth, it may 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'. But the appraised value is often employed 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 sell the property again. The bottom line is, an appraiser from Crescent Appraisal Group, Inc. will guarantee you attain the most accurate property value, so you can make wise real estate decisions.