What Is an Appraisal?
Acquiring real estate is the biggest transaction many of us may ever make. It doesn't matter if where you raise your family, a seasonal vacation property or one of many rentals, purchasing real property is a detailed transaction that requires multiple parties to pull it all off.
You're probably familiar with the parties having a role in the transaction. The real estate agent is the most familiar face in the exchange. Next, the lender provides the financial capital needed to bankroll the exchange. And ensuring all aspects of the exchange are completed and that a clear title transfers to the buyer from the seller is the title company.
So, who makes sure the value of the real estate is consistent with the purchase price? This is where the appraiser comes in. 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 Peak Appraisals, Inc. will ensure, you as an interested party, are informed.
The inspection is where an appraisal begins
Our first responsibility at Peak Appraisals, Inc. 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, and so on, to ensure they truly exist and are in the condition a typical person would expect them to be. To ensure the stated square footage is accurate and illustrate the layout of the house, the inspection often entails creating a sketch of the floorplan. Most importantly, the appraiser looks for any obvious amenities - or defects - that would affect the value of the property.
After the inspection, 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 we gather information on local construction costs, labor rates and other factors to figure out how much it would cost to replace the property being appraised. This estimate usually sets the maximum on what a property would sell for. It's also the least used method.
Appraisers become very familiar with the subdivisions in which they work. They innately understand the value of specific features to the people of that area. Then, the appraiser looks up recent transactions in the area and finds properties which are 'comparable' to the home being appraised. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, we adjust the comparable properties so that they more accurately portray the features of subject property.
In the end, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At Peak Appraisals, Inc., we are an authority in knowing the worth of real estate features in Bloomfield Hills and Oakland County neighborhoods. This approach to value is commonly awarded the most importance when an appraisal is for a real estate exchange.
Valuation Using the Income Approach
A third method of valuing approach to value is sometimes employed when an area has a measurable number of renter occupied properties. In this scenario, the amount of income the real estate generates is factored in with income produced by nearby properties to derive the current value.
Arriving at a Value Conclusion
Examining the data from all applicable approaches, the appraiser is then ready to document an estimated market value for the property at hand. It is important to note that while the appraised value is probably the best indication of what a house is worth, it probably will not be the final sales price. It'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'. But the appraised value is typically 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 put the property on the market again. At the end of the day, an appraiser from Peak Appraisals, Inc. will help you attain the most accurate property value, so you can make wise real estate decisions.