What are the components of an appraisal?A home purchase is the most serious investment some people may ever make. Whether it's where you raise your family, a seasonal vacation home or an investment, the purchase of real property is an involved transaction that requires multiple parties to see it through.
Most people are familiar with the parties taking part in the transaction. The real estate agent is the most known face in the exchange. Then, the lender provides the financial capital necessary to finance the deal. Ensuring all details of the exchange are completed and that a clear title passes from the seller to the purchaser is the title company.
So who makes sure the real estate is consistent with the amount being paid? In comes the appraiser. 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 professional Iowa licensed appraiser from Ascend Valuation Services, LLC will ensure you as an interested party are informed.
The inspection is where an appraisal beginsTo ascertain the true status of the property, it's our duty to first conduct a thorough inspection. We must physically see aspects of the property, such as the number of bedrooms and bathrooms, the location, living areas, etc., to ensure they indeed exist and are in the condition a typical person would expect them to be. To ensure the stated size of the property is accurate and convey the layout of the home, the inspection often requires creating a sketch of the floor plan. Most importantly, we look for any obvious features - or defects - that would have an impact on the value of the house.
Back at the office, we use two or three approaches when determining the value of real property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.
Cost ApproachHere, we analyze information on local construction costs, the cost of labor and other elements to derive how much it would cost to replace the property being appraised. This estimate commonly sets the upper limit on what a property would sell for. It's also the least used method.
Analyzing Comparable SalesAppraisers become very familiar with the neighborhoods in which they appraise. We thoroughly understand the value of certain features to the homeowners of that area. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are 'comparable' to the real estate in question. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, additional 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 property.
Valuation Using the Income ApproachIn the case of income producing properties - rental houses for example - we may use a third approach to value. In this situation, the amount of revenue the real estate generates is factored in with other rents in the area for comparable properties to determine the current value.
The Bottom LineCombining information from all approaches, the appraiser is then ready to put down an estimated market value for the property in question. It is important to note that while the appraised value is probably the best indication of what a house would sell for in an open market, it may not be the final sales price. 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. But the appraised value is often used as a guideline for lenders who don't want to loan a buyer more money than they could get back in case they had to put the property on the market again. It all comes down to this: An appraiser from Ascend Valuation Services, LLC will guarantee you attain the most accurate property value, so you can make wise real estate decisions.