What Goes Into an Appraisal?
Buying a home can be the largest transaction some will ever encounter. Whether it's a main residence, a seasonal vacation home or a rental fixer upper, the purchase of real property is a detailed financial transaction that requires multiple people working in concert to pull it all off.
Most people are familiar with the parties taking part in the transaction. The most familiar entity in the exchange is the real estate agent. Next, the lender provides the money required to fund the deal. And the title company ensures that all areas of the sale are completed and that the title is clear to transfer to the buyer from the seller.
So, who's responsible for making sure the value of the property is consistent with the amount being paid? This is where the appraiser comes in. 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 MFC Home Appraisals Inc will ensure, you as an interested party, are informed.
The inspection is where an appraisal begins
Our first responsibility at MFC Home Appraisals Inc is to inspect the property to determine its true status. We must actually see features, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really are present and are in the shape a reasonable person would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is proper and conveying the layout of the property. Most importantly, the appraiser identifies any obvious features - or defects - that would affect the value of the house.
Once the site has been inspected, an appraiser uses two or three approaches to determining the value of real property: sales comparison and, in the case of a rental property, an income approach.
This is where the appraiser pulls information on local construction costs, labor rates and other elements to determine how much it would cost to build a property similar to the one being appraised. This estimate usually sets the maximum on what a property would sell for. It's also the least used method.
Analyzing Comparable Sales
Appraisers are intimately familiar with the communities in which they work. They innately understand the value of particular features to the people of that area. Then, the appraiser looks up recent sales in the vicinity and finds properties which are 'comparable' to the home in question. By assigning a dollar value to certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or additional storage space, we adjust the comparable properties so that they more accurately portray the features of subject.
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 MFC Home Appraisals Inc, we are experts in knowing the value of particular items in Jupiter and Palm Beach County neighborhoods. The sales comparison approach to value is typically awarded the most weight 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 - we may use an additional method of valuing real estate. 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
Analyzing the data from all approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. It is important to note that while the appraised value is probably the best indication of what a house is worth, it probably will 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'. Regardless, the appraised value is typically employed as a guideline for lenders who don't want to loan a buyer more money than they could recover in case they had to sell the property again. It all comes down to this, an appraiser from MFC Home Appraisals Inc will help you discover the most accurate property value, so you can make the most informed real estate decisions.