Comprehending Appraisals

Acquiring real estate is the most important financial decision most will ever consider. Whether it's where you raise your family, a second vacation home or an investment, the purchase of real property is a complex financial transaction that requires multiple parties to make it all happen.

The majority of the participants are very familiar. The real estate agent is the most known entity in the transaction. Next, the mortgage company provides the financial capital required to finance the deal. And the title company makes sure that all areas of the exchange are completed and that the title is clear to pass to the buyer from the seller.

To learn more about appraising, click here to see a short video or call us today to talk about your specific property.

So, who makes sure the value of the real estate is in line with the purchase price? In comes the appraiser. 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 Rachel Bradshaw will ensure, you as an interested party, are informed.

Appraisals start with the home inspection

Our first responsibility at Rachel Bradshaw is to inspect the property to determine its true status. We must physically view aspects of the property, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed exist and are in the condition a reasonable buyer would expect them to be. The inspection often includes a sketch of the floorplan, 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 affect the value of the property.

After the inspection, 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.

Replacement Cost

This is where the appraiser analyzes information on local building costs, the cost of labor and other factors to determine how much it would cost to replace the property being appraised. This figure often sets the maximum on what a property would sell for. The cost approach is also the least used method.

Analyzing Comparable Sales

Appraisers get to know the neighborhoods in which they work. They innately understand the value of certain features to the homeowners of that area. Then, the appraiser looks up recent sales in close proximity to the subject and finds properties which are 'comparable' to the property being appraised. Using knowledge of the value of 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 more accurately match the features of subject.

For example, if the comparable has a fireplace and the subject does not, the appraiser may subtract the value of a fireplace from the sales price of the comparable home.
In the case where the subject has something such as an extra half bath that a comparable doesn't have, the appraiser might add the value of that bath to the comparable 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 value of features of homes in DeQueen and Sevier, Rachel Bradshaw can't be beat. This approach to value is typically given the most consideration when an appraisal is for a real estate exchange.

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 generates is factored in with income produced by neighboring properties to give an indicator of 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 in question. It is important to note that while this amount is probably the most reliable indication of what a house is worth, it probably will not be the price at which the property closes. Depending 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 they could recover in the event they had to put the property on the market again. The bottom line is, an appraiser from Rachel Bradshaw will help you get the most accurate property value, so you can make profitable real estate decisions.