Real Property Appraisals: A Primer
Purchasing a house can be the biggest transaction some people could ever consider. It doesn't matter if where you raise your family, a second vacation home or a rental fixer upper, purchasing real property is a detailed transaction that requires multiple parties to make it all happen.
The majority of the participants are quite familiar. The most familiar person in the exchange is the real estate agent. Then, the mortgage company provides the financial capital needed to bankroll the exchange. And ensuring all areas of the sale are completed and that the title is clear to pass to the buyer from the seller is the title company.
So, who's responsible for making sure the property is worth the amount being paid? In comes the appraiser. We provide an unbiased estimate 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 Appraisal Express HI, LLC will ensure, you as an interested party, are informed.
Inspecting the subject property
Our first duty at Appraisal Express HI, LLC 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, and so on, to ensure they really exist and are in the condition a typical buyer would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is correct and conveying the layout of the property. Most importantly, we identify any obvious amenities - or defects - that would have an impact on the value of the property.
After the inspection, we use two or three approaches to determining the value of real property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.
Here, we use information on local construction costs, labor rates and other elements to determine how much it would cost to build a property comparable to the one being appraised. This value commonly sets the upper limit 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 thoroughly understand the value of particular features to the residents of that area. Then, the appraiser looks up recent sales in the vicinity and finds properties which are 'comparable' to the subject being appraised. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, extra bathrooms or bedrooms, or quality of construction, we adjust the comparable properties so that they are more accurately in line with the features of subject.
Once all necessary adjustments have been made, 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 Express HI, LLC, we are an authority when it comes to knowing the value of real estate features in Kihei and Maui County neighborhoods. The sales comparison approach to value is typically awarded the most weight when an appraisal is for a home exchange.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - the appraiser may use a third approach to value. In this scenario, the amount of revenue the real estate generates is factored in with income produced by comparable properties to give an indicator of the current value.
The Bottom Line
Analyzing the data from all approaches, the appraiser is then ready to put down an estimated market value for the property in question. It is important to note that while this amount is probably the best indication of what a property is worth, it may not be the price at which the property closes. 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 employed as a guideline for lenders who don't want to loan a buyer more money than they could get back in the event they had to sell the property again. Here's what it all boils down to, an appraiser from Appraisal Express HI, LLC will help you attain the most fair and balanced property value, so you can make wise real estate decisions.