What Is an Appraisal?
Acquiring a house is the most important financial decision many people may ever make. Whether it's where you raise your family, a seasonal vacation property or an investment, the purchase of real property is a complex financial transaction that requires multiple people working in concert to make it all happen.
It's likely you are familiar with the parties taking part in the transaction. The most known entity in the exchange is the real estate agent. Then, the bank provides the financial capital required to bankroll the deal. And ensuring all requirements of the transaction are completed and that the title is clear to transfer to the buyer from the seller is the title company.
So, who makes sure the value of the real estate is in line with the amount being paid? In comes the appraiser. We provide an unbiased opinion of what a buyer might 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 Gage Appraisal Services will ensure, you as an interested party, are informed.
Inspecting the subject property
To ascertain an accurate status of the property, it's our duty to first perform 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 person would expect them to be. To make sure the stated size of the property is accurate and convey the layout of the house, the inspection often entails creating a sketch of the floorplan. Most importantly, we look for any obvious amenities - or defects - that would affect the value of the house.
Following the inspection, we use two or three approaches to determining the value of the property: paired sales analysis and, in the case of a rental property, an income approach.
This is where the appraiser analyzes information on local building costs, labor rates and other factors to determine how much it would cost to build a property nearly identical to the one being appraised. This figure usually sets the maximum on what a property would sell for. The cost approach is also the least used method.
Appraisers get to know the neighborhoods in which they appraise. They thoroughly understand the value of certain features to the residents of that area. Then, the appraiser researches recent transactions in the area and finds properties which are 'comparable' to the property at hand. Using knowledge of the value of certain items such as square footage, additional bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we adjust the comparable properties so that they more accurately portray the features of subject property.
A true estimate of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. When it comes to knowing the true value of features of homes in Lansing and Allamakee, Gage Appraisal Services is your local authority. The sales comparison approach to value is commonly awarded the most consideration when an appraisal is for a real estate sale.
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 revenue the real estate generates is taken into consideration along with other rents in the area for comparable properties to determine the current value.
Coming Up With The Final Value
Examining the data from all approaches, the appraiser is then ready to put down an estimated market value for the property at hand. Note: While the appraised value is probably the most accurate indication of what a house is worth, it may not be the final sales price. Prices can always be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. But the appraised value is typically employed as a guideline for lenders who don't want to loan a buyer more money than they could get back in the event they had to sell the property again. It all comes down to this, an appraiser from Gage Appraisal Services will help you attain the most fair and balanced property value, so you can make wise real estate decisions.