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Real Property Appraisals: A Primer
A home purchase
is
the most significant
financial decision
many
may
ever
consider.
It doesn't matter if it's
where you raise your family,
a second vacation home or
one of many rentals, the purchase of real property is
a complex transaction that requires multiple people working in concert to pull it all off.
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To learn more about appraising, click here to see a short video or call us today to talk about your specific property. |
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The majority of the participants are quite familiar.
The real estate agent is the most known entity in the exchange.
Then, the bank provides the money needed to fund the exchange.
The title company ensures that all aspects of the transaction are completed and that the title is clear to transfer from the seller to the purchaser.
So what party is responsible for making sure the property is consistent with the purchase price?
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 property, where both buyer and seller are informed parties. A professional Ohio licensed appraiser from Feasel Appraisal will ensure you as an interested party are informed.
The inspection is where an appraisal begins
Our first task at Feasel Appraisal is to inspect the property to ascertain its true status.
We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really are there and are in the shape a reasonable buyer would expect them to be.
To ensure the stated square footage is accurate and describe the layout of the property, the inspection often requires creating a sketch of the floor plan.
Most importantly, the appraiser looks for any obvious amenities - or defects - that would have an impact on the value of the property.
Back at the office, an appraiser employs two or three approaches when determining the value of real property:
a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.
Cost Approach
Here, we gather information on local building costs, labor rates and other elements to figure out how much it would cost to replace the property being appraised. This estimate commonly sets the maximum on what a property would sell for. It's also the least used method.
Analyzing Comparable Sales
Appraisers get to know the neighborhoods in which they appraise.
We innately understand the value of specific features to the residents of that area.
Then, the appraiser looks up recent sales in close proximity to the subject and finds properties which are 'comparable' to the home in question. By assigning a dollar value to certain items such as
fireplaces, room layout, appliance upgrades, extra bathrooms or bedrooms, or quality of construction, we add or subtract from each comparable's sales price so that they more accurately match the features of subject.
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If, for example, the comparable property has a fireplace and the subject doesn't, the appraiser may subtract the value of a fireplace from the sales price of the comparable home.
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If the subject property has an extra half-bathroom and the comparable does not, the appraiser might add a certain amount to the comparable property.
In the end, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for.
This approach to value is most often awarded the most importance when an appraisal is for a home exchange.
Valuation Using the Income Approach
A third way of valuing approach to value is sometimes employed when a neighborhood has a measurable number of rental properties.
In this situation, the amount of revenue the property produces is taken into consideration along with income produced by nearby properties to derive the current value.
Coming Up With the Final Value
Examining the data from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the property in question.
The estimate of value on the appraisal report is not always the final sales price even though it is likely the best indication of a property's market value
Depending on the individual 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.
Regardless, the appraised value is typically employed as a guideline for lenders who don't want to loan a buyer more money than the property would likely sell for in an open marketplace.
The bottom line is: An appraiser from Feasel Appraisal will guarantee you attain the most fair and balanced property value, so you can make wise real estate decisions.
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