What are the parts of an appraisal?Purchasing a house is the most important financial decision many of us could ever consider. Whether it's where you raise your family, a second vacation property or one of many rentals, the purchase of real property is a detailed transaction that requires multiple parties to pull it all off.
The majority of the participants are very familiar. The real estate agent is the most known entity in the transaction. Next, the lender provides the financial capital necessary to finance the transaction. The title company ensures that all details of the sale are completed and that a clear title passes from the seller to the buyer.
So what party is responsible for making sure the real estate is consistent with the purchase price? 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 professional Illinois licensed appraiser from Accurate Appraisals, Inc. will ensure you as an interested party are informed.
Appraisals start with the property inspectionOur first duty at Accurate Appraisals, Inc. is to inspect the property to ascertain its true status. We must physically see aspects of the property, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they indeed are there and are in the condition a typical person 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.
Following the inspection, 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, the cost of labor and other factors to derive how much it would cost to construct a property nearly identical to the one being appraised. This estimate commonly sets the upper limit on what a property would sell for. It's also the least used predictor of value.
Paired Sales AnalysisAppraisers are intimately familiar with the neighborhoods in which they work. We thoroughly understand the value of particular features to the residents of that area. Then, the appraiser researches recent sales in the vicinity and finds properties which are 'comparable' to the home in question. 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.
Valuation Using the Income ApproachA third method of valuing a property is sometimes applied when an area has a reasonable number of rental properties. In this case, the amount of revenue the real estate produces is taken into consideration along with income produced by similar properties to derive the current value.
Coming Up With the Final ValueCombining information from all approaches, the appraiser is then ready to document an estimated market value for the subject property. The estimate of value on the appraisal report is not necessarily what's being paid for the property even though it is likely the best indication of a property's market value Depending on the specific 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 typically employed as a guideline for lenders who don't want to loan a buyer more money than they could recover in the event they had to put the property on the market again. Here's what it all boils down to: An appraiser from Accurate Appraisals, Inc. will help you discover the most accurate property value, so you can make the most informed real estate decisions.