What Are the Components of an Appraisal?
Acquiring a house is the largest financial decision many may ever consider. It doesn't matter if a primary residence, an additional vacation property or a rental fixer upper, purchasing real property is an involved transaction that requires multiple parties to see it through.
Practically all the participants are quite familiar. The real estate agent is the most familiar entity in the exchange. Next, the bank provides the money needed to bankroll the transaction. And ensuring all details of the exchange are completed and that the title is clear to transfer from the seller to the purchaser is the title company.
So, what party makes sure the real estate is worth the amount being paid? This is where you meet the appraiser. We provide an unbiased opinion of what a buyer could expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Holloway Appraisals, LLC will ensure, you as an interested party, are informed.
Appraisals start with the inspection
Our first responsibility at Holloway Appraisals, LLC is to inspect the property to ascertain its true status. We must actually view aspects of the property, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really exist and are in the condition a typical buyer would expect them to be. To make sure the stated size of the property has not been misrepresented and illustrate the layout of the home, the inspection often entails creating a sketch of the floorplan. Most importantly, we identify 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 real property: paired sales analysis and, in the case of a rental property, an income approach.
This is where we analyze information on local building costs, labor rates and other factors to figure out how much it would cost to replace the property being appraised. This figure commonly sets the upper limit on what a property would sell for. The cost approach is also the least used method.
Paired Sales Analysis
Appraisers get to know the neighborhoods in which they work. They innately understand the value of certain features to the homeowners of that area. Then, the appraiser researches recent transactions in the neighborhood and finds properties which are 'comparable' to the subject in question. By assigning a dollar value to certain items such as fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, we adjust the comparable properties so that they more accurately match 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. At Holloway Appraisals, LLC, we are experts when it comes to knowing the value of real estate features in Fayetteville and Washington County neighborhoods. The sales comparison approach to value is typically given the most importance when an appraisal is for a real estate exchange.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - the appraiser may use an additional approach to value. In this situation, the amount of revenue the real estate generates is factored in with income produced by similar properties to determine the current value.
Putting It All Together
Examining the data from all approaches, the appraiser is then ready to stipulate an estimated market value for the property at hand. The estimate of value at the bottom of the appraisal report is not always what's being paid for the property even though it is likely the best indication of what a property is worth. 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 they could get back in the event they had to sell the property again. At the end of the day, an appraiser from Holloway Appraisals, LLC will guarantee you attain the most fair and balanced property value, so you can make profitable real estate decisions.