A home purchase can be the largest investment many people may ever encounter. It doesn't matter if where you raise your family, a second vacation home or an investment, the purchase of real property is an involved transaction that requires multiple people working in concert to make it all happen.
The majority of the participants are quite familiar. The real estate agent is the most recognizable entity in the transaction. Next, the mortgage company provides the financial capital required to bankroll the transaction. And ensuring all details of the transaction are completed and that a clear title transfers from the seller to the buyer is the title company.
So, who makes sure the value of the property is consistent with the purchase price? In comes the appraiser. We provide an unbiased estimate of what a buyer could expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Streamline Appraisals/Tim Taylor Realty will ensure, you as an interested party, are informed.
The inspection is where an appraisal begins
Our first duty at Streamline Appraisals/Tim Taylor Realty is to inspect the property to ascertain its true status. We must see features first hand, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really are there and are in the condition a typical buyer would expect them to be. To make sure the stated square footage has not been misrepresented and illustrate the layout of the property, the inspection often entails creating a sketch of the floorplan. Most importantly, we look for any obvious features - or defects - that would affect the value of the house.
Following the inspection, an appraiser uses two or three approaches to determining the value of the property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.
Here, the appraiser uses information on local construction costs, labor rates and other factors to ascertain how much it would cost to construct a property similar to the one being appraised. This estimate often sets the upper limit on what a property would sell for. The cost approach is also the least used method.
Paired Sales Analysis
Appraisers become very familiar with the subdivisions in which they work. They innately understand the value of specific features to the people of that area. Then, the appraiser researches recent transactions in close proximity to the subject and finds properties which are 'comparable' to the property being appraised. By assigning a dollar value to certain items such as square footage, extra bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we adjust the comparable properties so that they more accurately match the features of subject.
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. When it comes to knowing the true value of features of homes in High Point and Guilford, Streamline Appraisals/Tim Taylor Realty is second to none. This approach to value is typically given the most consideration when an appraisal is for a real estate exchange.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - the appraiser may use a third method of valuing real estate. In this situation, the amount of income the property produces is factored in with income produced by nearby properties to determine the current value.
The Bottom Line
Analyzing the data from all applicable approaches, the appraiser is then ready to state an estimated market value for the subject property. 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 what a property is worth. 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'. 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 Streamline Appraisals/Tim Taylor Realty will help you get the most accurate property value, so you can make the most informed real estate decisions.