Real Estate Appraisals: A PrimerBuying real estate can be the largest transaction many will ever consider. It doesn't matter if it's a primary residence, a seasonal vacation property or an investment, purchasing real property is an involved financial transaction that requires multiple people working in concert to make it all happen.
Most of the participants are very familiar. The real estate agent is the most familiar face in the exchange. Then, the mortgage company provides the money required to bankroll the transaction. Ensuring all areas of the exchange are completed and that a clear title passes to the buyer from the seller is the title company.
So who makes sure the value of the property is consistent with the purchase price? This is where you meet 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 professional Iowa licensed appraiser from Behrens Appraisal Services will ensure you as an interested party are informed.
Inspecting the subject propertyOur first duty at Behrens Appraisal Services is to inspect the property to determine its true status. We must physically see features, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they truly are there 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, we look for any obvious amenities - or defects - that would have an impact on the value of the property.
Back at the office, an appraiser employs two or three approaches when determining the value of the property: sales comparison and, in the case of a rental property, an income approach.
Cost ApproachHere, the appraiser uses information on local building costs, labor rates and other factors to derive how much it would cost to construct a property nearly identical to the one being appraised. This figure commonly sets the maximum on what a property would sell for. It's also the least used method.
Paired Sales AnalysisAppraisers get to know the communities in which they appraise. We innately understand the value of specific features to the homeowners of that area. Then, the appraiser looks up recent transactions in the area and finds properties which are 'comparable' to the home at hand. Using knowledge of the value of certain items such as square footage, additional bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we adjust the comparable properties so that they are more accurately in line with the features of subject.
Valuation Using the Income ApproachA third method of valuing a house is sometimes used when a neighborhood has a measurable number of rental properties. In this case, the amount of income the property produces is factored in with other rents in the area for comparable properties to determine the current value.
Arriving at a Value ConclusionCombining information from all approaches, the appraiser is then ready to document an estimated market value for the property at hand. The estimate of value at the bottom of the appraisal report is not necessarily the final sales price even though it is likely the best indication of a property's market value Depending on the individual circumstances 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. Regardless, the appraised value is often used 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. Here's what it all boils down to: An appraiser from Behrens Appraisal Services will help you get the most accurate property value, so you can make wise real estate decisions.