What is an appraisal?Acquiring a home is the largest transaction most of us might ever consider. Whether it's where you raise your family, an additional vacation home or an investment, purchasing real property is an involved transaction that requires multiple parties to make it all happen.
You're probably familiar with the parties taking part in the transaction. The real estate agent is the most recognizable face in the transaction. Then, the bank provides the money necessary to bankroll the deal. Ensuring all requirements of the sale are completed and that a clear title passes to the buyer from the seller is the title company.
So what party makes sure the real estate is consistent with the amount being paid? In comes the appraiser. We provide an unbiased opinion of what a buyer could expect to pay - or a seller receive - for a property, where both buyer and seller are informed parties. A professional Michigan licensed appraiser from Leese Appraisal Service will ensure you as an interested party are informed.
The inspection is where an appraisal beginsOur first task at Leese Appraisal Service is to inspect the property to ascertain its true status. We must physically view features, such as the number of bedrooms and bathrooms, the location, living areas, etc., to ensure they indeed are there and are in the condition a typical buyer would expect them to be. The inspection often includes a sketch of the floor plan, ensuring the square footage is proper and conveying the layout of the property. Most importantly, we look for any obvious features - or defects - that would affect the value of the house.
Back at the office, we use two or three approaches when determining the value of the property: sales comparison and, in the case of a rental property, an income approach.
Replacement CostThis is where the appraiser uses information on local construction costs, labor rates and other elements to calculate how much it would cost to build a property nearly identical to the one being appraised. This figure often sets the upper limit on what a property would sell for. The cost approach is also the least used predictor of value.
Paired Sales AnalysisAppraisers become very familiar with the subdivisions in which they work. We thoroughly understand the value of specific features to the people of that area. Then, the appraiser researches recent transactions in the neighborhood and finds properties which are 'comparable' to the real estate in question. 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 property.
Valuation Using the Income ApproachA third method of valuing a house is sometimes applied when an area has a measurable number of renter occupied properties. In this case, the amount of revenue the property produces is factored in with income produced by comparable properties to determine the current value.
Coming Up With the Final ValueExamining the data from all approaches, the appraiser is then ready to state an estimated market value for the property at hand. It is important to note that while the appraised value is probably the most reliable indication of what a house would sell for in an open market, it may not be the final sales price. There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust the final price up or down. Regardless, the appraised value is typically 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 Leese Appraisal Service will help you attain the most accurate property value, so you can make the most informed real estate decisions.