What are the components of an appraisal?Getting a home is the most important financial decision most of us might ever encounter. It doesn't matter if it's where you raise your family, an additional vacation home or a rental fixer upper, the purchase of real property is an involved transaction that requires multiple people working in concert to see it through.
Most of the participants are quite familiar. The most known person in the transaction is the real estate agent. Then, the lender provides the money needed to fund the exchange. Ensuring all areas of the exchange are completed and that a clear title transfers to the buyer from the seller is the title company.
So who makes sure the property is consistent with the purchase price? In comes the appraiser. We provide an unbiased opinion of what a buyer could expect to pay - or a seller receive - for a property, where both buyer and seller are informed parties. A professional Missouri licensed appraiser from Bax Appraisal Services, LLC will ensure you as an interested party are informed.
Appraisals begin with the property inspectionTo ascertain the true status of the property, it's our responsibility to first conduct a thorough inspection. We must physically view features, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really exist and are in the condition a reasonable buyer would expect them to be. To ensure the stated square footage is accurate and describe the layout of the house, the inspection often requires creating a sketch of the floor plan. Most importantly, we identify any obvious features - or defects - that would have an impact on the value of the property.
Back at the office, we use two or three approaches when determining the value of the property: paired sales analysis and, in the case of a rental property, an income approach.
Cost ApproachThis is where we use information on local building costs, the cost of labor and other elements to calculate how much it would cost to construct a property comparable to the one being appraised. This figure often sets the maximum on what a property would sell for. It's also the least used method.
Analyzing Comparable SalesAppraisers can tell you a lot about the subdivisions in which they work. We thoroughly understand the value of certain features to the homeowners of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the home 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 more accurately match the features of subject property.
Valuation Using the Income ApproachA third way of valuing real estate is sometimes employed when an area has a reasonable number of renter occupied properties. In this case, the amount of income the real estate produces is taken into consideration along with other rents in the area for comparable properties to determine the current value.
ReconciliationCombining information from all applicable approaches, the appraiser is then ready to state an estimated market value for the subject property. It is important to note that while this amount is probably the most accurate indication of what a house would sell for in an open market, it probably will not be the final sales price. There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust the final price 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 would likely sell for in an open marketplace. At the end of the day: An appraiser from Bax Appraisal Services, LLC will help you attain the most fair and balanced property value, so you can make wise real estate decisions.