What Are the Components of an Appraisal?
A home purchase is the biggest transaction most could ever make. It doesn't matter if a primary residence, a seasonal vacation home or a rental fixer upper, the purchase of real property is a complex transaction that requires multiple parties to see it through.
Most of the participants are quite familiar. The real estate agent is the most recognizable person in the exchange. Next, the mortgage company provides the money necessary to finance the transaction. The title company ensures that all aspects of the exchange are completed and that the title is clear to pass to the buyer from the seller.
So, what party is 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 TSH Real Estate and Appraisal Services, LLC will ensure, you as an interested party, are informed.
The inspection is where an appraisal begins
Our first responsibility at TSH Real Estate and Appraisal Services, LLC is to inspect the property to ascertain its true status. We must see aspects of the property first hand, 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 buyer would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is proper and illustrating the layout of the property. Most importantly, the appraiser looks for any obvious features - or defects - that would affect the value of the house.
After the inspection, we use two or three approaches to determining the value of the property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.
Here, we gather information on local building costs, the cost of labor and other elements to determine how much it would cost to build 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.
Analyzing Comparable Sales
Appraisers can tell you a lot about the subdivisions in which they appraise. They innately understand the value of specific features to the people of that area. Then, the appraiser looks up recent sales in close proximity to the subject and finds properties which are 'comparable' to the property at hand. By assigning a dollar value to certain items such as upgraded appliances, additional bathrooms, additional living area, quality of construction, lot size, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject.
After all differences have been accounted for, 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 associating a value with features of homes in Kaneohe and Honolulu, TSH Real Estate and Appraisal Services, LLC is second to none. The sales comparison approach to value is typically given the most weight when an appraisal is for a home sale.
Valuation Using the Income Approach
A third way of valuing approach to value is sometimes applied when an area has a measurable number of rental properties. In this scenario, the amount of revenue the property generates is factored in with income produced by comparable properties to determine the current value.
Combining information from all applicable approaches, the appraiser is then ready to put down an estimated market value for the property at hand. It is important to note that while the appraised value is probably the strongest indication of what a house is worth, it probably will not be the final sales price. 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 they could get back in case they had to sell the property again. At the end of the day, an appraiser from TSH Real Estate and Appraisal Services, LLC will help you attain the most fair and balanced property value, so you can make the most informed real estate decisions.