What Is an Appraisal?
A home or other real property purchase can be the most important investment some could ever encounter. Whether it's a primary residence, an additional vacation home or a rental fixer upper, buying a commercial building or a special use (ie church, marina, etc.) real property is a detailed financial transaction that requires multiple parties to make it all happen.
You're probably familiar with the parties having a role in the transaction. The most known person in the exchange is the real estate agent and/or broker. Then, the mortgage company or bank provides the financial capital required to fund the exchange. And the title company ensures that all areas of the transaction are completed and that the title is clear to transfer to the buyer from the seller.
So, what party is responsible for making sure the value of the real estate is consistent with the amount being paid? This is where the appraiser comes in. We provide an unbiased estimate 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. As a State Certified, full-time, professional appraiser since 1980, Karen Mann of Mann & Associates - Appraisal & Expert Witness Services will endeavor that the appropriate analysis is performed to provide you a fair and trustworthy appraisal of the real property.
The inspection is where an appraisal starts
The first task is to observe the property; in order to observe the condition, size, amenities and other aspectes which contribute to the property personality. Appraisers are not Home or Property Inspector who can determine the functionality of the structure. Appraisers provide an opinion of Market Value of a property based on all the parameters present either at the time of observation or based on the completion of the construction.
Once the property has been observed, the zoning confirmed and other aspects investigated, the appraiser uses two or three methods or approaches to determining the value of real property: namely, sales comparison, cost approach and/or the income approach. The methodology use is typically determined based on the norm of the market and the customary method used by peers.
This is where we pull information on local building costs, labor rates and other factors to determine how much it would cost to replace the property being appraised. This value commonly sets the upper limit on what a property would sell for. It's also the least used predictor of value.
Sales Comparison Aapproach
Appraisers get to know the market areas and the marketability of specific property types. They thoroughly understand the value of certain features to the residents of that area. Then, the appraiser researches recent sales in the vicinity and finds properties which are 'comparable' to the property under appraisal. Using knowledge of the value of certain items such as square footage, additional bathrooms, floor covering, view lots (just to name a few), we add or subtract from each comparable property sales price so that they more accurately portray the features of subject. The goal is to recognize the contributory value of the components in the comparable and adjust the differences to become most similar to the subject.
An opinion of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated.
Valuation Using the Income Approach
A third way of valuing approach to value is sometimes applied when a neighborhood has a measurable number of rental properties. In this scenario, the amount of revenue the real estate produces is factored in with other rents in the area for comparable properties to give an indicator of the current value.
Arriving at a Value Conclusion
Examining the data from all applicable approaches, the appraiser is then ready to document an estimated market value for the subject property. It is important to note that while this amount is probably the strongest indication of what a house is worth, it probably will not be the final sales price. It's not uncommon for prices to be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. Regardless, the appraised value is often used as a guideline for lenders who don't want to loan a buyer more money than they could get back in case they had to sell the property again. Here's what it all boils down to, an appraiser from Mann & Associates - Appraisal and Expert Witness Services have the experience (since 1980) to produce a fair and trustworthy appraisal report.