What Goes Into an Appraisal?
Purchasing real estate is the most serious investment some people may ever encounter. It doesn't matter if where you raise your family, a seasonal vacation property or one of many rentals, purchasing real property is a detailed transaction that requires multiple parties to make it all happen.
Practically all the participants are quite familiar. The most known face in the transaction is the real estate agent. Next, the bank provides the financial capital required to bankroll the deal. And ensuring all aspects of the transaction are completed and that the title is clear to transfer to the buyer from the seller is the title company.
So, what party makes sure the value of the property is in line with the purchase price? 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 parcel of real estate, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Frigoletto & Associates Inc. will ensure, you as an interested party, are informed.
The inspection is where an appraisal begins
To determine an accurate status of the property, it's our responsibility to first perform 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 present and are in the shape a typical person would expect them to be. To ensure the stated size of the property has not been misrepresented and convey the layout of the house, the inspection often entails creating a sketch of the floorplan. Most importantly, the appraiser looks for any obvious features - or defects - that would affect the value of the property.
Following the inspection, we use two or three approaches to determining the value of the property: sales comparison and, in the case of a rental property, an income approach.
This is where the appraiser uses information on local building costs, the cost of labor and other elements to derive how much it would cost to replace the property being appraised. This figure usually sets the maximum on what a property would sell for. It's also the least used method.
Analyzing Comparable Sales
Appraisers become very familiar with the communities in which they appraise. They thoroughly understand the value of specific features to the homeowners of that area. Then, the appraiser researches recent transactions in the neighborhood and finds properties which are 'comparable' to the subject at hand. Using knowledge of the value of certain items such as upgraded appliances, extra bathrooms, additional living area, quality of construction, lot size, we adjust the comparable properties 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. At Frigoletto & Associates Inc., we are experts when it comes to knowing the value of real estate features in Leominster and Worcester County neighborhoods. This approach to value is most often awarded the most weight 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 situation, the amount of revenue the property generates is factored in with income produced by neighboring properties to derive the current value.
Combining information from all applicable approaches, the appraiser is then ready to document an estimated market value for the property in question. It is important to note that while this amount is probably the strongest indication of what a property is worth, 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 the property is actually worth. It all comes down to this, an appraiser from Frigoletto & Associates Inc. will guarantee you attain the most fair and balanced property value, so you can make profitable real estate decisions.