What Are the Components of an Appraisal?
Acquiring a house can be the biggest transaction many of us may ever encounter. Whether it's where you raise your family, an additional vacation home or one of many rentals, the purchase of real property is an involved transaction that requires multiple parties to see it through.
Practically all the participants are very familiar. The most familiar entity in the exchange is the real estate agent. Next, the lender provides the money required to finance the deal. And ensuring all details of the transaction are completed and that a clear title passes from the seller to the purchaser is the title company.
So, who's responsible for making sure the property is worth the purchase price? In comes the appraiser. We provide an unbiased opinion of what a buyer might expect to pay — or a seller receive — for a property, 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.
The inspection is where an appraisal starts
To determine the true status of the property, it's our duty to first complete a thorough inspection. We must see features first hand, 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. The inspection often includes a sketch of the house, ensuring the square footage is proper and conveying the layout of the property. Most importantly, the appraiser identifies any obvious amenities - or defects - that would have an impact on the value of the property.
After the inspection, an appraiser uses two or three approaches to determining the value of real property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.
Here, the appraiser uses information on local building costs, labor rates and other factors to figure out how much it would cost to construct a property similar to the one being appraised. This value usually sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.
Appraisers become very familiar with the communities in which they appraise. They innately understand the value of certain 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 subject at hand. By assigning a dollar value to 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. When it comes to putting a value on features of homes in Palmer and Matanuska Susitna, Alaska Real Estate Appraisal can't be beat. The sales comparison approach to value is commonly given the most importance when an appraisal is for a home purchase.
Valuation Using the Income Approach
A third method of valuing approach to value is sometimes applied when an area has a measurable number of renter occupied properties. In this scenario, the amount of revenue the property produces is factored in with other rents in the area for comparable properties to give an indicator of the current value.
Arriving at a Value Conclusion
Combining information from all approaches, the appraiser is then ready to put down an estimated market value for the subject property. Note: While the appraised value is probably the most reliable indication of what a house is worth, it probably will not be the price at which the property closes. Prices can always be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. 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 is actually worth. At the end of the day, an appraiser from Alaska Real Estate Appraisal will help you get the most accurate property value, so you can make wise real estate decisions.