What Are the Parts of an Appraisal?
Purchasing a house can be the most important transaction most will ever make. Whether it's a main residence, a seasonal vacation home or one of many rentals, the purchase of real property is a detailed transaction that requires multiple parties to see it through.
You're likely to be familiar with the parties having a role in the transaction. The most familiar face in the transaction is the real estate agent. Next, the bank provides the money needed to fund the transaction. And ensuring all requirements of the transaction are completed and that the title is clear to pass to the buyer from the seller is the title company.
So, who's responsible for making sure the real estate is worth 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 licensed, certified, professional appraiser from Pyramid Appraisals, Inc. will ensure, you as an interested party, are informed.
The inspection is where an appraisal begins
To determine the true status of the property, it's our responsibility to first perform a thorough inspection. We must physically view features, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they really are there and are in the condition a typical buyer would expect them to be. To ensure the stated square footage has not been misrepresented and document the layout of the home, 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 house.
Following 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 use information on local construction costs, labor rates and other factors to ascertain how much it would cost to build a property comparable to the one being appraised. This figure commonly sets the maximum on what a property would sell for. It's also the least used method.
Analyzing Comparable Sales
Appraisers are intimately familiar with the communities in which they work. They innately understand the value of certain features to the homeowners of that area. Then, the appraiser looks up recent sales in the area and finds properties which are 'comparable' to the property at hand. Using knowledge of the value of certain items such as upgraded appliances, additional bathrooms, additional living area, quality of construction, lot size, we adjust the comparable properties so that they are more accurately in line with the features of subject property.
A valid estimate of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. When it comes to associating a value with features of homes in Stoughton and Dane, Pyramid Appraisals, Inc. can't be beat. This approach to value is usually awarded the most consideration when an appraisal is for a real estate sale.
Valuation Using the Income Approach
A third method of valuing a house is sometimes applied when a neighborhood has a measurable number of renter occupied properties. In this case, the amount of revenue the real estate yields is factored in with income produced by comparable properties to give an indicator of the current value.
The Bottom Line
Analyzing the data from all approaches, the appraiser is then ready to state an estimated market value for the subject property. Note: While this amount is probably the most reliable indication of what a house is worth, it may not be the final sales price. There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust an offer or listing price up or down. Regardless, the appraised value is often used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. Here's what it all boils down to, an appraiser from Pyramid Appraisals, Inc. will guarantee you get the most accurate property value, so you can make wise real estate decisions.