A home purchase is the most serious transaction most people might ever consider. It doesn't matter if where you raise your family, a seasonal vacation property or an investment, purchasing real property is a complex financial transaction that requires multiple parties to see it through.
The majority of the participants are very familiar. The most familiar entity in the exchange is the real estate agent. Then, the mortgage company provides the financial capital necessary to bankroll the deal. And ensuring all requirements of the transaction are completed and that a clear title transfers to the buyer from the seller is the title company.
So, what party is responsible for making sure the value of the property is consistent with the amount being paid? In comes the appraiser. We provide an unbiased estimate 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 Williams Appraisal Service will ensure, you as an interested party, are informed.
Inspecting the subject property
To determine an accurate status of the property, it's our duty to first perform a thorough inspection. 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 typical buyer would expect them to be. To make sure the stated size of the property has not been misrepresented and convey the layout of the house, the inspection often entails creating a sketch of the floorplan. Most importantly, the appraiser looks for any obvious amenities - or defects - that would affect the value of the property.
Back at the office, an appraiser uses two or three approaches to determining the value of real property: paired sales analysis and, in the case of a rental property, an income approach.
Here, the appraiser analyzes information on local construction costs, the cost of labor and other factors to derive how much it would cost to replace the property being appraised. This figure often sets the maximum on what a property would sell for. It's also the least used predictor of value.
Appraisers get to know the communities in which they work. They innately understand the value of specific features to the homeowners of that area. Then, the appraiser researches recent transactions in the neighborhood and finds properties which are 'comparable' to the home being appraised. 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 match the features of subject.
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. When it comes to knowing the true worth of features of homes in Tupelo and Lee, Williams Appraisal Service is second to none. This approach to value is typically awarded 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 way of valuing real estate. In this situation, the amount of revenue the property produces is taken into consideration along with income produced by similar properties to give an indicator of the current value.
The Bottom Line
Combining information from all applicable approaches, the appraiser is then ready to state an estimated market value for the property at hand. The estimate of value on the appraisal report is not necessarily the final sales price even though it is likely the best indication of what a property is worth. There are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust an offer or listing price up or down. Regardless, the appraised value is often used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. It all comes down to this, an appraiser from Williams Appraisal Service will help you attain the most fair and balanced property value, so you can make the most informed real estate decisions.