Home Appraisals: A PrimerOne's home purchase is the most serious transaction some people might ever make. Whether it's a main residence, a second vacation property or an investment, the purchase of real property is a complex financial transaction that requires multiple parties to make it all happen.
Most of the participants are very familiar. The real estate agent is the most known entity in the exchange. Next, the lender provides the financial capital required to fund the deal. The title company ensures that all details of the transaction are completed and that the title is clear to transfer to the buyer from the seller.
So who makes sure the value of the real estate is in line with the purchase price? In comes the appraiser. We provide an unbiased estimate of what a buyer might expect to pay - or a seller receive - for a parcel of real estate, where both buyer and seller are informed parties. A professional Michigan licensed appraiser from New Century Appraisal, LLC will ensure you as an interested party are informed.
Appraisals start with the property inspectionTo determine the true status of the property, it's our duty to first complete a thorough inspection. We must physically see aspects of the property, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed are present and are in the shape a reasonable buyer would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is proper and illustrating the layout of the property. Most importantly, we identify any obvious amenities - or defects - that would have an impact on the value of the house.
Following the inspection, an appraiser employs two or three approaches when determining the value of the property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.
Replacement CostThis is where we gather 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 figure commonly sets the upper limit on what a property would sell for. It's also the least used method.
Paired Sales AnalysisAppraisers are intimately familiar with the communities in which they work. We thoroughly understand the value of particular features to the people of that area. Then, the appraiser researches recent sales in the vicinity and finds properties which are 'comparable' to the property being appraised. Using knowledge of the value of certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or additional storage space, we adjust the comparable properties 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 - the appraiser may use an additional approach to value. In this scenario, the amount of revenue the real estate generates is factored in with income produced by similar properties to derive the current value.
Putting It All TogetherExamining the data from all applicable approaches, the appraiser is then ready to put down an estimated market value for the subject property. 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 a property's market value Prices can always be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. But the appraised value is typically used as a guideline for lenders who don't want to loan a buyer more money than they could recover in the event they had to put the property on the market again. At the end of the day: An appraiser from New Century Appraisal, LLC will help you attain the most fair and balanced property value, so you can make wise real estate decisions.