What goes into an appraisal?One's home purchase can be the most important transaction some people will ever consider. It doesn't matter if it's where you raise your family, a seasonal vacation home or a rental fixer upper, the purchase of real property is a complex transaction that requires multiple parties to make it all happen.
The majority of the participants are quite familiar. The most recognizable face in the exchange is the real estate agent. Next, the bank provides the financial capital necessary to finance the transaction. Ensuring all details of the sale are completed and that the title is clear to pass from the seller to the purchaser is the title company.
So what party is responsible for making sure the real estate is consistent with the amount being paid? 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 Tennessee licensed appraiser from Gregory W. Easter, IFA will ensure you as an interested party are informed.
Inspecting the subject propertyOur first responsibility at Gregory W. Easter, IFA is to inspect the property to determine its true status. We must see features first hand, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they truly exist and are in the shape a reasonable person would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is accurate and conveying the layout of the property. Most importantly, the appraiser looks for any obvious features - or defects - that would have an impact on the value of the house.
Once the site has been inspected, we use two or three approaches when determining the value of real property: paired sales analysis and, in the case of a rental property, an income approach.
Cost ApproachThis is where we pull information on local construction costs, the cost of labor and other factors to derive how much it would cost to replace the property being appraised. This figure commonly sets the maximum on what a property would sell for. It's also the least used predictor of value.
Paired Sales AnalysisAppraisers can tell you a lot about the neighborhoods in which they work. We thoroughly understand the value of particular features to the people of that area. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are 'comparable' to the real estate in question. 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 add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject.
Valuation Using the Income ApproachIn the case of income producing properties - rental houses for example - we may use an additional way of valuing real estate. In this case, the amount of income the property produces is taken into consideration along with other rents in the area for comparable properties to determine the current value.
ReconciliationAnalyzing the data from all approaches, the appraiser is then ready to stipulate an estimated market value for the property at hand. Note: While the appraised value is probably the best indication of what a house would sell for in an open market, it may not be the price at which the property closes. There are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust an offer or listing price up or down. But the appraised value is often 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. The bottom line is: An appraiser from Gregory W. Easter, IFA will guarantee you get the most fair and balanced property value, so you can make the most informed real estate decisions.