What are the parts of an appraisal?Purchasing a house is the biggest financial decision many of us will ever encounter. It doesn't matter if it's where you raise your family, an additional vacation home or a rental fixer upper, purchasing real property is a complex transaction that requires multiple people working in concert to pull it all off.
The majority of the parties involved are very familiar. The real estate agent is the most known face in the transaction. Next, the lender provides the financial capital required to finance the transaction. The title company ensures that all areas of the transaction are completed and that a clear title transfers to the buyer from the seller.
So who makes sure the real estate is worth the purchase price? This is where the appraiser comes in. We provide an unbiased estimate of what a buyer might expect to pay - or a seller receive - for a parcel of real estate, where both buyer and seller are informed parties. A professional North Carolina licensed appraiser from Strickland Associates, Inc. will ensure you as an interested party are informed.
The inspection is where an appraisal beginsTo determine the true status of the property, it's our duty to first perform a thorough inspection. We must physically view features, 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 person would expect them to be. To make sure the stated size of the property has not been misrepresented and convey the layout of the home, the inspection often entails creating a sketch of the floor plan. Most importantly, the appraiser identifies any obvious amenities - or defects - that would have an impact on the value of the house.
Once the site has been inspected, we use two or three approaches to determining the value of the property: sales comparison and, in the case of a rental property, an income approach.
Cost ApproachThis is where the appraiser pulls information on local construction costs, the cost of labor and other factors to determine 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. The cost approach is also the least used predictor of value.
Analyzing Comparable SalesAppraisers become very familiar with the communities in which they work. They innately understand the value of particular features to the people of that area. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are 'comparable' to the subject at hand. Using knowledge of the value of 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.
An opinion of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. At Strickland Associates, Inc., we are an authority when it comes to knowing the value of real estate features in Roanoke Rapids and Halifax County neighborhoods. This approach to value is usually awarded the most importance when an appraisal is for a home sale.
Valuation Using the Income ApproachIn the case of income producing properties - rental houses for example - the appraiser may use a third approach to value. In this situation, the amount of income the property yields is taken into consideration along with income produced by comparable properties to give an indicator of the current value.
Arriving at a Value ConclusionExamining the data from all approaches, the appraiser is then ready to state an estimated market value for the property in question. The estimate of value at the bottom of the appraisal report is not necessarily what's being paid for the property even though it is likely the best indication of a property's value 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. 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. It all comes down to this: An appraiser from Strickland Associates, Inc. will help you attain the most fair and balanced property value, so you can make profitable real estate decisions.