What Goes Into an Appraisal?
Acquiring real estate is the biggest investment most people could ever encounter. It doesn't matter if where you raise your family, a seasonal vacation property or an investment, purchasing real property is an involved financial transaction that requires multiple people working in concert to pull it all off.
Most of the participants are quite familiar. The real estate agent is the most known person in the transaction. Next, the mortgage company provides the financial capital necessary to bankroll the exchange. And the title company makes sure that all areas of the transaction are completed and that a clear title passes from the seller to the purchaser.
So, who makes sure the value of the property is consistent with the purchase price? In comes the appraiser. We provide an unbiased opinion 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 Clearbrook Appraisal will ensure, you as an interested party, are informed.
Inspecting the subject property
To ascertain an accurate status of the property, it's our responsibility to first conduct a thorough inspection. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really exist and are in the shape a reasonable buyer would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is accurate and conveying the layout of the property. Most importantly, we identify 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.
Here, the appraiser gathers information on local building costs, labor rates and other factors to calculate how much it would cost to build a property comparable to the one being appraised. This estimate commonly sets the maximum on what a property would sell for. The cost approach is also the least used method.
Appraisers can tell you a lot about the neighborhoods in which they work. They innately understand the value of certain features to the residents of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the subject 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 more accurately match 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 Clearbrook Appraisal, we are experts when it comes to knowing the value of particular items in Clawson and Oakland County neighborhoods. The sales comparison approach to value is usually awarded the most weight when an appraisal is for a home purchase.
Valuation Using the Income Approach
A third way of valuing approach to value is sometimes employed when an area has a reasonable number of rental properties. In this case, the amount of revenue the real estate generates is taken into consideration along with other rents in the area for comparable properties to give an indicator of the current value.
Putting It All Together
Combining information from all applicable approaches, the appraiser is then ready to document an estimated market value for the property in question. Note: While the appraised value is probably the best indication of what a house is worth, it probably will not be the final sales price. 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 typically employed 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 Clearbrook Appraisal will guarantee you get the most accurate property value, so you can make the most informed real estate decisions.