Decoding the Appraisal Process
Buying a house is the most significant financial decision some people may ever make. It doesn't matter if a primary residence, a second vacation property or a rental fixer upper, the purchase of real property is a detailed financial transaction that requires multiple parties to make it all happen.
Most people are familiar with the parties having a role in the transaction. The real estate agent is the most familiar person in the transaction. Next, the mortgage company provides the financial capital needed to bankroll the transaction. And ensuring all details of the transaction are completed and that a clear title transfers to the buyer from the seller is the title company.
So, who's responsible for making sure the property is worth the amount being paid? 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 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.
The inspection is where an appraisal begins
To ascertain the true status of the property, it's our responsibility to first complete a thorough inspection. We must physically view features, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed are there and are in the shape a reasonable buyer would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is proper and illustrating the layout of the property. Most importantly, the appraiser looks for any obvious amenities - or defects - that would have an impact on the value of the property.
Once the site has been inspected, 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.
Here, we pull information on local building costs, the cost of labor and other factors to figure out how much it would cost to replace the property being appraised. This value usually sets the upper limit on what a property would sell for. It's also the least used method.
Appraisers become very familiar with the subdivisions in which they work. They innately understand the value of specific features to the residents of that area. Then, the appraiser looks up recent transactions in the vicinity and finds properties which are 'comparable' to the subject in question. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, additional 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.
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 knowing the true value of features of homes in Metairie and Jefferson, Crescent Appraisal Group, Inc. is your local authority. The sales comparison approach to value is most often given the most weight when an appraisal is for a home exchange.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - the appraiser may use an additional way of valuing a property. In this scenario, the amount of revenue the real estate generates is factored in with income produced by similar properties to derive the current value.
Putting It All Together
Analyzing the data from all approaches, the appraiser is then ready to stipulate an estimated market value for the property in question. The estimate of value at the bottom of the appraisal report is not necessarily the final sales price even though it is likely the best indication of a property's valueIt'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 employed 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 get the most accurate property value, so you can make profitable real estate decisions.