Real Estate Appraisals: A Primer
A home purchase is the most significant investment many of us may ever encounter. Whether it's a primary residence, an additional vacation home or one of many rentals, the purchase of real property is an involved financial transaction that requires multiple parties to see it through.
Most of the participants are very familiar. The real estate agent is the most recognizable face in the exchange. Next, the mortgage company provides the financial capital needed to fund the transaction. The title company makes sure 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 purchase price? 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 licensed, certified, professional appraiser from Alaska Real Estate Appraisal will ensure, you as an interested party, are informed.
Inspecting the subject property
Our first duty at Alaska Real Estate Appraisal is to inspect the property to ascertain its true status. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed exist and are in the condition a reasonable person would expect them to be. To make sure the stated size of the property is accurate and illustrate the layout of the property, the inspection often requires creating a sketch of the floorplan. Most importantly, we look for any obvious features - or defects - that would have an impact on the value of the house.
Following the inspection, an appraiser uses 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.
Here, we gather information on local building costs, labor rates and other factors to ascertain how much it would cost to build a property similar to the one being appraised. This value often sets the maximum on what a property would sell for. It's also the least used predictor of value.
Paired Sales Analysis
Appraisers are intimately familiar with the subdivisions in which they work. They thoroughly understand the value of specific features to the people 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 in question. 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.
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. At Alaska Real Estate Appraisal, we are an authority when it comes to knowing the worth of real estate features in Palmer and Matanuska Susitna County neighborhoods. This approach to value is commonly given the most weight 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 - we may use an additional approach to value. In this case, the amount of revenue the real estate generates is factored in with income produced by nearby 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 state an estimated market value for the property in question. It is important to note that while the appraised value is probably the most reliable indication of what a property is worth, it probably will not be the price at which the property closes. Depending on the specific 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 typically employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. It all comes down to this, an appraiser from Alaska Real Estate Appraisal will guarantee you get the most fair and balanced property value, so you can make wise real estate decisions.