What Are the Components of an Appraisal?
Their home's purchase can be the biggest financial decision many of us could ever make. It doesn't matter if where you raise your family, a second vacation home or an investment, the purchase of real property is a complex financial transaction that requires multiple people working in concert to make it all happen.
The majority of the people involved are very familiar. The most known face in the exchange is the real estate agent. Next, the bank provides the financial capital needed to bankroll the exchange. The title company sees to it that all requirements of the transaction are completed and that the title is clear to transfer to the buyer from the seller.
So, what party makes sure the value of the real estate is consistent with the purchase price? This is where the appraiser comes in. We provide an unbiased opinion of what a buyer could expect to pay — or a seller receive — for a parcel of real estate, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from McNeeley Appraisals, LLC. will ensure, you as an interested party, are informed.
Inspecting the subject property
To determine the true status of the property, it's our duty to first conduct a thorough inspection. We must see features hands on, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really are there and are in the condition a typical buyer would expect them to be. The inspection often includes a sketch of the property, 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 have an impact on the value of the property.
Back at the office, we use two or three approaches to determining the value of real property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.
Here, the appraiser gathers information on local building costs, labor rates and other factors to derive how much it would cost to replace the property being appraised. This estimate 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 Analysis
Appraisers are intimately familiar with the communities in which they work. They innately understand the value of specific features to the residents of that area. Then, the appraiser looks up recent transactions in the area and finds properties which are 'comparable' to the property being appraised. 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 are more accurately in line with the features of subject.
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. At McNeeley Appraisals, LLC., we are experts in knowing the value of particular items in Elmwood Park and Cook County neighborhoods. The sales comparison approach to value is most often awarded the most consideration when an appraisal is for a home exchange.
Valuation Using the Income Approach
A third method of valuing approach to value is sometimes used when a neighborhood has a reasonable number of renter occupied properties. In this case, the amount of income the property yields is factored in with other rents in the area for comparable properties to give an indicator of the current value.
Coming Up With The Final Value
Analyzing the data from all applicable approaches, the appraiser is then ready to document an estimated market value for the property at hand. The estimate of value at the bottom of the appraisal report is not necessarily the final sales price even though it is likely the best indication of a property's valueDepending 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 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 put the property on the market again. At the end of the day, an appraiser from McNeeley Appraisals, LLC. will help you discover the most fair and balanced property value, so you can make wise real estate decisions.