Home Appraisals: A Primer
Purchasing real estate can be the most serious transaction most of us will ever consider. It doesn't matter if a main residence, a seasonal vacation property or one of many rentals, the purchase of real property is a complex transaction that requires multiple parties to see it through.
You're likely to be familiar with the parties having a role in the transaction. The real estate agent is the most known entity in the exchange. Next, the mortgage company provides the financial capital required to bankroll the exchange. And ensuring all requirements of the sale are completed and that the title is clear to transfer from the seller to the purchaser is the title company.
So, who makes sure the value of the property is consistent 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 property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Appraisal Metrics will ensure, you as an interested party, are informed.
Appraisals begin with the inspection
Our first duty at Appraisal Metrics is to inspect the property to determine its true status. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they indeed are there and are in the shape a reasonable buyer would expect them to be. To ensure the stated square footage is accurate and convey the layout of the property, the inspection often entails creating a sketch of the floorplan. Most importantly, we identify any obvious features - or defects - that would have an impact on the value of the property.
Once the site has been inspected, we use two or three approaches to determining the value of real property: paired sales analysis and, in the case of a rental property, an income approach.
This is where the appraiser pulls 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 value often sets the maximum on what a property would sell for. The cost approach is also the least used method.
Appraisers are intimately familiar with the subdivisions in which they appraise. They thoroughly understand the value of certain 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 subject at hand. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, extra bathrooms or bedrooms, or quality of construction, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject property.
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. At Appraisal Metrics, we are experts when it comes to knowing the worth of real estate features in Novi and Oakland County neighborhoods. This approach to value is typically given the most consideration when an appraisal is for a real estate purchase.
Valuation Using the Income Approach
A third way of valuing approach to value is sometimes employed when an area has a reasonable number of renter occupied properties. In this scenario, the amount of income the property yields is taken into consideration along with income produced by neighboring properties to derive the current value.
Arriving at a Value Conclusion
Examining the data from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the property in question. The estimate of value on the appraisal report is not always the final sales price even though it is likely the best indication of a property's valueIt's not uncommon for prices to be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. 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 is actually worth. Here's what it all boils down to, an appraiser from Appraisal Metrics will help you get the most fair and balanced property value, so you can make profitable real estate decisions.