Decoding the Appraisal Process
Getting real estate is the most important financial decision most of us might ever consider. Whether it's where you raise your family, a second vacation home or one of many rentals, purchasing real property is a detailed transaction that requires multiple people working in concert to make it all happen.
The majority of the participants are quite familiar. The most familiar face in the transaction is the real estate agent. Then, the bank provides the financial capital required to fund the transaction. The title company sees to it that all details of the transaction are completed and that a clear title transfers to the buyer from the seller.
So, who's responsible for making sure the real estate is worth the purchase price? This is where the appraiser comes in. We provide an unbiased estimate 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 Midwest Valuation, LLC will ensure, you as an interested party, are informed.
Appraisals begin with the property inspection
To determine an accurate status of the property, it's our responsibility to first perform a thorough inspection. We must see features first hand, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they indeed are present 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 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: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.
This is where we analyze information on local construction costs, labor rates and other factors to ascertain how much it would cost to build a property comparable to the one being appraised. This value commonly sets the maximum on what a property would sell for. It's also the least used predictor of value.
Analyzing Comparable Sales
Appraisers can tell you a lot about the neighborhoods in which they work. They thoroughly understand the value of particular features to the homeowners of that area. Then, the appraiser researches recent sales in the neighborhood and finds properties which are 'comparable' to the home in question. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, extra bathrooms or bedrooms, or quality of construction, we adjust the comparable properties so that they more accurately portray the features of subject property.
An opinion of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. At Midwest Valuation, LLC, we are experts when it comes to knowing the worth of real estate features in Lake Lotawana and Jackson County neighborhoods. This approach to value is usually awarded the most importance when an appraisal is for a real estate sale.
Valuation Using the Income Approach
A third way of valuing real estate is sometimes used when an area has a reasonable number of renter occupied properties. In this scenario, the amount of income the property produces is factored in with income produced by similar properties to derive 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 property in question. 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 Midwest Valuation, LLC will guarantee you attain the most accurate property value, so you can make wise real estate decisions.