What Goes Into an Appraisal?
A home purchase is the most serious investment some of us might ever make. It doesn't matter if where you raise your family, an additional vacation property or one of many rentals, purchasing real property is a detailed transaction that requires multiple parties to see it through.
Most people are familiar with the parties taking part in the transaction. The real estate agent is the most known entity in the transaction. Then, the bank provides the financial capital needed to finance the transaction. The title company ensures that all areas of the transaction are completed and that a clear title transfers to the buyer from the seller.
So, who's responsible for making sure the real estate is worth the purchase price? This is where the appraiser comes in. We provide an unbiased estimate of what a buyer could expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from C. Gaba Appraisals, LLC will ensure, you as an interested party, are informed.
The inspection is where an appraisal begins
Our first responsibility at C. Gaba Appraisals, LLC is to inspect the property to ascertain its true status. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they really exist and are in the condition a reasonable person would expect them to be. To ensure the stated size of the property is accurate and convey the layout of the house, the inspection often includes creating a sketch of the floorplan. Most importantly, we look for any obvious features - or defects - that would affect the value of the house.
Back at the office, an appraiser uses two or three approaches to determining the value of the property: sales comparison and, in the case of a rental property, an income approach.
Here, we gather information on local building costs, labor rates and other elements to calculate how much it would cost to construct a property similar to the one being appraised. This figure usually sets the upper limit on what a property would sell for. The cost approach is also the least used predictor of value.
Appraisers are intimately familiar with the neighborhoods in which they work. They thoroughly understand the value of particular features to the residents of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the real estate in question. By assigning a dollar value to certain items such as upgraded appliances, extra bathrooms, additional living area, quality of construction, lot size, we add or subtract from each comparable's sales price so that they more accurately portray the features of subject property.
After all differences have been accounted for, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. When it comes to knowing the true value of features of homes in Mobile and Mobile, C. Gaba Appraisals, LLC can't be beat. This approach to value is commonly awarded the most weight when an appraisal is for a real estate sale.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - the appraiser may use a third way of valuing real estate. In this scenario, the amount of revenue the real estate yields is factored in with other rents in the area for comparable properties to determine the current value.
Putting It All Together
Combining information from all approaches, the appraiser is then ready to put down an estimated market value for the subject property. The estimate of value on the appraisal report is not always the final sales price even though it is likely the best indication of a property's valueDepending on the specific 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.Regardless, the appraised value is often employed 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 C. Gaba Appraisals, LLC will help you attain the most fair and balanced property value, so you can make profitable real estate decisions.