Buying real estate can be the biggest transaction most of us could ever make. Whether it's where you raise your family, an additional vacation property or one of many rentals, purchasing real property is a complex transaction that requires multiple parties to see it through.
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You're probably familiar with the parties having a role in the transaction. The real estate agent is the most known person in the transaction. Next, the bank provides the money necessary to fund the exchange. The title company makes sure that all aspects of the sale are completed and that a clear title transfers to the buyer from the seller.
So what party makes sure the real estate 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 parcel of real estate, where both buyer and seller are informed parties. A professional Missouri licensed appraiser from Jackson Appraisal Services, LLC 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 complete a thorough inspection. We must actually see aspects of the property, such as the number of bedrooms and bathrooms, the location, living areas, etc., to ensure they really exist and are in the shape a reasonable buyer would expect them to be. The inspection often includes a sketch of the floor plan, ensuring the square footage is proper and illustrating the layout of the property. Most importantly, we look for any obvious features - or defects - that would have an impact on the value of the property.
Back at the office, an appraiser employs two or three approaches when determining the value of the property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.
Replacement Cost
This is where the appraiser gathers information on local construction costs, the cost of labor and other elements to derive how much it would cost to construct a property comparable to the one being appraised. This figure 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 get to know the communities in which they work. We thoroughly understand the value of certain features to the homeowners of that area. Then, the appraiser looks up recent sales in the vicinity and finds properties which are 'comparable' to the real estate being appraised. 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.
For example, if the comparable property has an irrigation system and the subject doesn't, the appraiser may deduct the value of an irrigation system from the sales price of the comparable.
If the subject property has an extra half-bathroom and the comparable does not, the appraiser might add an amount to the comparable property.
A true estimate of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. The sales comparison approach to value is usually 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 - we may use a third approach to value. In this scenario, the amount of revenue the property generates is taken into consideration along with income produced by similar properties to determine the current value.
The Bottom Line
Analyzing the data from all applicable approaches, the appraiser is then ready to put down an estimated market value for the property at hand. It is important to note that while the appraised value is probably the most accurate indication of what a property is worth, it may not be the final sales price. Depending on the specific circumstances 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. But the appraised value is often 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 Jackson Appraisal Services, LLC will help you discover the most accurate property value, so you can make wise real estate decisions.
