An Overview of the Appraisal ProcessBuying a home can be the most significant financial decision most of us could ever make. It doesn't matter if it's where you raise your family, a second vacation property or an investment, the purchase of real property is a complex transaction that requires multiple parties to make it all happen.
Most of the participants are very familiar. The real estate agent is the most familiar entity in the exchange. Next, the lender provides the financial capital required to finance the exchange. The title company makes sure that all details of the transaction are completed and that the title is clear to transfer to the buyer from the seller.
So what party is responsible for making sure 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 might expect to pay - or a seller receive - for a property, where both buyer and seller are informed parties. A professional Massachusetts licensed appraiser from National Home Appraisal Corporation will ensure you as an interested party are informed.
Appraisals start with the home inspectionOur first task at National Home Appraisal Corporation is to inspect the property to determine its true status. We must physically view aspects of the property, 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 person would expect them to be. The inspection often includes a sketch of the floor plan, ensuring the square footage is accurate and conveying the layout of the property. Most importantly, the appraiser identifies any obvious amenities - or defects - that would affect the value of the house.
Once the site has been inspected, an appraiser employs two or three approaches when determining the value of real property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.
Cost ApproachThis is where we analyze information on local building costs, the cost of labor and other factors to determine how much it would cost to construct a property comparable to the one being appraised. This figure usually sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.
Analyzing Comparable SalesAppraisers can tell you a lot about the communities in which they appraise. We innately understand the value of particular features to the residents of that area. Then, the appraiser researches recent transactions in the neighborhood and finds properties which are 'comparable' to the subject in question. Using knowledge of the value of certain items such as square footage, extra bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we adjust the comparable properties so that they are more accurately in line with the features of subject.
Valuation Using the Income ApproachIn the case of income producing properties - rental houses for example - we may use a third approach to value. In this scenario, the amount of income the property generates is factored in with other rents in the area for comparable properties to determine the current value.
ReconciliationCombining information from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the property at hand. The estimate of value on the appraisal report is not necessarily the final sales price even though it is likely the best indication of a property's market value Depending on the individual 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 typically used as a guideline for lenders who don't want to loan a buyer more money than the property would likely sell for in an open marketplace. Here's what it all boils down to: An appraiser from National Home Appraisal Corporation will help you discover the most accurate property value, so you can make the most informed real estate decisions.