What Are the Parts of an Appraisal?
Getting a house can be the most serious financial decision most may ever consider. Whether it's where you raise your family, a second vacation property or an investment, purchasing real property is a complex financial transaction that requires multiple people working in concert to make it all happen.
You're likely to be familiar with the parties having a role in the transaction. The real estate agent is the most recognizable entity in the exchange. Then, the bank provides the money required to bankroll the transaction. The title company ensures that all areas of the sale are completed and that the title is clear to pass to the buyer from the seller.
So, who's responsible for making sure the real estate is worth the amount being paid? This is where you meet the appraiser. 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 Strobbe & Co. will ensure, you as an interested party, are informed.
Appraisals begin with the inspection
To determine an accurate status of the property, it's our responsibility to first perform a thorough inspection. We must actually view aspects of the property, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they indeed are there and are in the shape a typical person would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is correct and conveying the layout of the property. Most importantly, the appraiser identifies any obvious features - or defects - that would affect the value of the property.
Once the site has been inspected, 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 pulls information on local construction costs, the cost of labor and other factors to derive how much it would cost to replace the property being appraised. This estimate commonly sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.
Analyzing Comparable Sales
Appraisers get to know the neighborhoods in which they appraise. They thoroughly understand the value of particular features to the residents of that area. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are 'comparable' to the home being appraised. Using knowledge of the value of certain items such as square footage, extra bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject.
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. At Strobbe & Co., we are an authority when it comes to knowing the value of real estate features in Lake City and Craighead County neighborhoods. The sales comparison approach to value is commonly given the most weight when an appraisal is for a home purchase.
Valuation Using the Income Approach
A third method of valuing real estate is sometimes employed when an area has a measurable number of rental properties. In this case, the amount of income the real estate produces is taken into consideration along with income produced by nearby properties to give an indicator of the current value.
Coming Up With The Final Value
Combining information from all applicable approaches, the appraiser is then ready to document an estimated market value for the property at hand. The estimate of value on the appraisal report is not necessarily the final sales price even though it is likely the best indication of a property's valueThere are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust an offer or listing price up or down. But the appraised value is often employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. Here's what it all boils down to, an appraiser from Strobbe & Co. will guarantee you discover the most accurate property value, so you can make the most informed real estate decisions.