What Are the Components of an Appraisal?
A home purchase is the biggest financial decision most may ever make. Whether it's a main 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 pull it all off.
The majority of the participants are quite familiar. The most familiar entity in the transaction is the real estate agent. Then, the bank provides the financial capital needed to fund the exchange. And the title company makes sure that all areas of the exchange are completed and that the title is clear to transfer from the seller to the purchaser.
So, what party is responsible for making sure the value of the property is in line with 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 property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Militti Appraisal Service will ensure, you as an interested party, are informed.
Inspecting the subject property
Our first duty at Militti Appraisal Service is to inspect the property to determine its true status. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they truly are present and are in the shape a typical person would expect them to be. To ensure the stated square footage has not been misrepresented and describe the layout of the property, the inspection often requires creating a sketch of the floorplan. Most importantly, the appraiser looks for any obvious amenities - or defects - that would have an impact on the value of the house.
Following the inspection, we use 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 uses information on local construction costs, the cost of labor and other elements to ascertain how much it would cost to replace the property being appraised. This estimate usually sets the upper limit on what a property would sell for. It's also the least used method.
Appraisers are intimately familiar with the subdivisions in which they appraise. They innately understand the value of certain features to the homeowners of that area. Then, the appraiser looks up recent transactions in the vicinity and finds properties which are 'comparable' to the real estate at hand. By assigning a dollar value to certain items such as upgraded appliances, extra bathrooms, additional living area, quality of construction, lot size, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject property.
After all differences have been accounted for, 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 Panama City and Bay, Militti Appraisal Service can't be beat. The sales comparison approach to value is most often given the most weight when an appraisal is for a real estate sale.
Valuation Using the Income Approach
A third way of valuing a house is sometimes applied when a neighborhood has a measurable number of rental properties. In this scenario, the amount of income the real estate produces is factored in with other rents in the area for comparable properties to determine the current value.
The Bottom Line
Combining information from all approaches, the appraiser is then ready to stipulate an estimated market value for the property at hand. The estimate of value on 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 valueDepending on the specific situations 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 used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. At the end of the day, an appraiser from Militti Appraisal Service will guarantee you discover the most fair and balanced property value, so you can make wise real estate decisions.