What Are the Parts of an Appraisal?
Purchasing a home can be the most serious investment most might ever encounter. It doesn't matter if a main residence, an additional vacation home or a rental fixer upper, the purchase of real property is an involved transaction that requires multiple parties to see it through.
The majority of the participants are very familiar. The most known face in the exchange is the real estate agent. Then, the mortgage company provides the financial capital required to bankroll the transaction. And the title company sees to it that all details of the transaction are completed and that the title is clear to transfer from the seller to the purchaser.
So, who's responsible for making sure the value of the property is in line 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 licensed, certified, professional appraiser from Appraisals by Kana, LLC will ensure, you as an interested party, are informed.
Appraisals start with the home inspection
Our first task at Appraisals by Kana, LLC is to inspect the property to ascertain its true status. We must physically see features, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly exist and are in the condition a typical buyer would expect them to be. To make sure the stated square footage has not been misrepresented and convey the layout of the house, the inspection often entails creating a sketch of the floorplan. Most importantly, the appraiser looks for any obvious features - or defects - that would affect the value of the property.
Next, after the inspection, we use 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, the appraiser analyzes information on local construction costs, the cost of labor and other factors to derive how much it would cost to construct a property comparable to the one being appraised. This value commonly sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.
Paired Sales Analysis
Appraisers can tell you a lot about the neighborhoods in which they appraise. They thoroughly understand the value of specific features to the people of that area. Then, the appraiser looks up recent sales in the vicinity and finds properties which are 'comparable' to the property being appraised. By assigning a dollar value to certain items such as upgraded appliances, extra bathrooms, additional living area, quality of construction, lot size, we adjust the comparable properties so that they more accurately match the features of subject.
A valid estimate of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. When it comes to putting a value on features of homes in Lafayette and Lafayette, Appraisals by Kana, LLC is second to none. The sales comparison approach to value is most often awarded the most consideration when an appraisal is for a real estate sale.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - the appraiser may use a third method of valuing a property. In this situation, the amount of revenue the property produces is factored in with income produced by neighboring properties to derive the current value.
The Bottom Line
Combining information from all approaches, the appraiser is then ready to document an estimated market value for the property in question. Note: While the appraised value is probably the most reliable indication of what a property is worth, it probably will not be the final sales price. 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 often used as a guideline for lenders who don't want to loan a buyer more money than they could recover in case they had to sell the property again. The bottom line is, an appraiser from Appraisals by Kana, LLC will guarantee you attain the most accurate property value, so you can make wise real estate decisions.