Real Estate Appraisals: A Primer
Their home's purchase can be the most important investment many people could ever consider. Whether it's where you raise your family, an additional vacation home or one of many rentals, the purchase of real property is an involved financial transaction that requires multiple people working in concert to see it through.
Practically all the participants are very familiar. The real estate agent is the most known person in the transaction. Then, the mortgage company provides the money required to fund the exchange. The title company makes sure that all requirements of the sale are completed and that a clear title transfers to the buyer from the seller.
So, who's responsible for making sure the value of the real estate is in line with the amount being paid? In comes the appraiser. 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. A licensed, certified, professional appraiser from Shamrock Appraisals, Inc. will ensure, you as an interested party, are informed.
The inspection is where an appraisal begins
Our first responsibility at Shamrock Appraisals, Inc. is to inspect the property to ascertain its true status. We must physically view aspects of the property, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly are present and are in the condition a typical buyer would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is correct and illustrating the layout of the property. Most importantly, the appraiser identifies any obvious amenities - or defects - that would affect the value of the property.
Back at the office, an appraiser uses two or three approaches to determining the value of the property: sales comparison and, in the case of a rental property, an income approach.
This is where we analyze information on local building costs, labor rates and other elements to ascertain how much it would cost to replace the property being appraised. This value usually sets the maximum on what a property would sell for. It's also the least used predictor of value.
Paired Sales Analysis
Appraisers can tell you a lot about the neighborhoods in which they work. They thoroughly understand the value of specific features to the homeowners of that area. Then, the appraiser looks up recent sales in the area and finds properties which are 'comparable' to the home being appraised. Using knowledge of the value of certain items such as square footage, extra bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject property.
Once all necessary adjustments have been made, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At Shamrock Appraisals, Inc., we are an authority when it comes to knowing the worth of real estate features in Tuscaloosa and Tuscaloosa County neighborhoods. This approach to value is most often awarded the most consideration when an appraisal is for a real estate purchase.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - we may use an additional approach to value. In this situation, the amount of income the property generates is taken into consideration along with other rents in the area for comparable properties to determine the current value.
Analyzing the data from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the property at hand. The estimate of value at the bottom of the appraisal report is not necessarily the final sales price even though it is likely the best indication of a property's valueIt'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'. 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. It all comes down to this, an appraiser from Shamrock Appraisals, Inc. will help you attain the most accurate property value, so you can make the most informed real estate decisions.