What is an appraisal?Buying a house is the biggest transaction many of us will 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 detailed transaction that requires multiple parties to make it all happen.
Practically all the participants are quite familiar. The most familiar entity in the exchange is the real estate agent. Then, the mortgage company provides the financial capital needed to bankroll the exchange. Ensuring all aspects of the sale are completed and that a clear title transfers to the buyer from the seller is the title company.
So what party makes sure the value of the real estate is in line with the amount being paid? This is where you meet 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 Kentucky licensed appraiser from Meade & Associates will ensure you as an interested party are informed.
Inspecting the subject propertyOur first responsibility at Meade & Associates is to inspect the property to determine its true status. We must actually see aspects of the property, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really are present and are in the shape a reasonable buyer would expect them to be. To make sure the stated square footage is accurate and illustrate the layout of the property, the inspection often requires creating a sketch of the floor plan. Most importantly, we look for any obvious amenities - or defects - that would have an impact on the value of the house.
Once the site has been inspected, an appraiser employs two or three approaches when determining the value of real property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.
Replacement CostThis is where we pull information on local construction costs, labor rates and other elements to calculate how much it would cost to replace the property being appraised. This estimate usually 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 appraise. We innately understand the value of specific features to the residents of that area. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are 'comparable' to the real estate at hand. Using knowledge of the value of certain items such as square footage, extra bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we add or subtract from each comparable's sales price so that they more accurately match the features of subject.
Valuation Using the Income ApproachIn the case of income producing properties - rental houses for example - the appraiser may use a third method of valuing a house. In this situation, the amount of income the real estate generates is taken into consideration along with income produced by comparable properties to derive the current value.
ReconciliationCombining information from all applicable approaches, the appraiser is then ready to document an estimated market value for the property in question. The estimate of value at the bottom of the appraisal report is not always the final sales price even though it is likely the best indication of a property's market value Depending on the individual situations 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. But the appraised value is often used 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 sell the property again. Here's what it all boils down to: An appraiser from Meade & Associates will help you discover the most accurate property value, so you can make wise real estate decisions.