Real Property Appraisals: A PrimerPurchasing a home can be the biggest transaction most will ever consider. Whether it's a primary residence, an additional vacation property or an investment, purchasing real property is a complex transaction that requires multiple people working in concert to make it all happen.
The majority of the people participating are very familiar. The real estate agent is the most familiar face in the transaction. Next, the mortgage company provides the financial capital necessary to bankroll the exchange. The title company ensures that all areas of the exchange are completed and that a clear title transfers to the buyer from the seller.
So who's responsible for making sure the value of the real estate is consistent with the amount being paid? This is where you meet the appraiser. We provide an unbiased estimate 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 professional Tennessee licensed appraiser from Hayes Appraisal Group, Inc. will ensure you as an interested party are informed.
Inspecting the subject propertyOur first task at Hayes Appraisal Group, Inc. is to inspect the property to determine its true status. We must see features first hand, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly are there and are in the condition a typical buyer would expect them to be. To ensure the stated square footage is accurate and convey the layout of the property, the inspection often includes creating a sketch of the floor plan. Most importantly, we look for any obvious features - or defects - that would affect the value of the property.
Once the site has been inspected, an appraiser employs two or three approaches when determining the value of the property: sales comparison and, in the case of a rental property, an income approach.
Cost ApproachHere, the appraiser uses information on local construction costs, the cost of labor and other elements to calculate how much it would cost to replace the property being appraised. This value often sets the upper limit on what a property would sell for. It's also the least used method.
Analyzing Comparable SalesAppraisers are intimately familiar with the subdivisions in which they appraise. We innately understand the value of particular features to the people of that area. Then, the appraiser researches recent transactions in the neighborhood and finds properties which are 'comparable' to the property at hand. By assigning a dollar value to 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 portray the features of subject.
Valuation Using the Income ApproachA third method of valuing real estate is sometimes employed when an area has a measurable number of rental properties. In this situation, the amount of income the property produces is factored in with income produced by nearby properties to determine the current value.
Arriving at a Value ConclusionCombining information from all applicable approaches, the appraiser is then ready to document an estimated market value for the property at hand. Note: While the appraised value is probably the strongest indication of what a house would sell for in an open market, it probably will not be the price at which the property closes. 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. Regardless, the appraised value is typically used as a guideline for lenders who don't want to loan a buyer more money than they could recover in case they had to sell the property again. Here's what it all boils down to: An appraiser from Hayes Appraisal Group, Inc. will help you get the most fair and balanced property value, so you can make wise real estate decisions.