What is an appraisal?Getting a house can be the most significant financial decision some of us could ever consider. It doesn't matter if it's where you raise your family, an additional vacation property or a rental fixer upper, the purchase of real property is a complex transaction that requires multiple people working in concert to pull it all off.
Most people are familiar with the parties having a role in the transaction. The most known person in the exchange is the real estate agent. Next, the lender provides the money necessary to finance the deal. The title company sees to it that all requirements of the exchange are completed and that a clear title transfers to the buyer from the seller.
So who makes sure the real estate is consistent with the amount being paid? This is where the appraiser comes in. 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 Nebraska licensed appraiser from Independent Appraisal Co. will ensure you as an interested party are informed.
The inspection is where an appraisal startsOur first responsibility at Independent Appraisal Co. is to inspect the property to ascertain its true status. We must see features first hand, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really are there and are in the shape a typical buyer would expect them to be. The inspection often includes a sketch of the floor plan, ensuring the square footage is accurate and illustrating the layout of the property. Most importantly, the appraiser looks for any obvious amenities - or defects - that would affect the value of the property.
Once the site has been inspected, an appraiser employs two or three approaches when determining the value of real property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.
Replacement CostThis is where we analyze information on local construction costs, labor rates and other elements to ascertain how much it would cost to replace the property being appraised. This figure usually sets the upper limit on what a property would sell for. It's also the least used method.
Paired Sales AnalysisAppraisers are intimately familiar with the communities in which they work. We innately understand the value of certain features to the homeowners of that area. Then, the appraiser researches recent transactions 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 fireplaces, room layout, appliance upgrades, extra bathrooms or bedrooms, or quality of construction, we adjust the comparable properties so that they more accurately portray the features of subject.
Valuation Using the Income ApproachA third method of valuing real estate is sometimes employed when an area has a measurable number of renter occupied properties. In this situation, the amount of income the property produces is factored in with other rents in the area for comparable properties to derive the current value.
ReconciliationCombining information from all approaches, the appraiser is then ready to document an estimated market value for the property at hand. The estimate of value on the appraisal report is not necessarily the final sales price even though it is likely the best indication of what a property could sell for in an open market. There are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust the final price 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 the property would likely sell for in an open marketplace. It all comes down to this: An appraiser from Independent Appraisal Co. will help you get the most accurate property value, so you can make wise real estate decisions.