Comprehending Appraisals

Purchasing real estate is the largest financial decision many people may ever make. Whether it's where you raise your family, a seasonal vacation home or a rental fixer upper, the purchase of real property is a detailed transaction that requires multiple people working in concert to make it all happen.

It's likely you are familiar with the parties having a role in the transaction. The most familiar entity in the exchange is the real estate agent. Next, the bank provides the financial capital needed to fund the exchange. And ensuring all areas of the transaction are completed and that a clear title transfers to the buyer from the seller is the title company.

To learn more about appraising, click here to see a short video or call us today to talk about your specific property.

So, what party is responsible for making sure the property is worth the amount being paid? In comes the appraiser. We provide an unbiased estimate 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 Aspire Appraisal Services, LLC will ensure, you as an interested party, are informed.

Appraisals start with the inspection

To determine an accurate status of the property, it's our duty to first complete a thorough inspection. We must physically see features, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they indeed are there and are in the shape a reasonable buyer would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is accurate and illustrating the layout of the property. Most importantly, we look for any obvious amenities - or defects - that would affect the value of the property.

Next, after the inspection, an appraiser uses two or three approaches to determining the value of real property: sales comparison and, in the case of a rental property, an income approach.

Replacement Cost

Here, the appraiser analyzes information on local construction costs, the cost of labor and other elements to derive how much it would cost to construct a property nearly identical to the one being appraised. This estimate usually sets the upper limit on what a property would sell for. The cost approach is also the least used predictor of value.

Sales Comparison

Appraisers get to know the neighborhoods in which they appraise. They innately understand the value of certain 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 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 add or subtract from each comparable's sales price so that they more accurately portray the features of subject.

  • If, for example, the comparable has an irrigation system and the subject doesn't, the appraiser may deduct the value of an irrigation system from the sales price of the comparable home.
  • But, in the case where the subject has something such as an extra half bath that a comparable doesn't have, the appraiser might add the value of that bath to the comparable property.

An opinion of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. At Aspire Appraisal Services, LLC, we are experts when it comes to knowing the value of real estate features in Westland and Wayne 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 way of valuing real estate is sometimes employed when an area has a measurable number of rental properties. In this situation, the amount of revenue the property yields is factored in with income produced by neighboring properties to give an indicator of the current value.

Reconciliation

Combining information from all applicable approaches, the appraiser is then ready to state an estimated market value for the property at hand. Note: While the appraised value is probably the best indication of what a property is worth, it probably will not be the price at which the property closes. It's not uncommon for prices to be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. But the appraised value is often employed as a guideline for lenders who don't want to loan a buyer more money than they could get back in case they had to sell the property again. At the end of the day, an appraiser from Aspire Appraisal Services, LLC will help you get the most fair and balanced property value, so you can make the most informed real estate decisions.