What Is an Appraisal?
Their home's purchase can be the most significant transaction most of us may ever encounter. It doesn't matter if a main residence, an additional vacation home or a rental fixer upper, the purchase of real property is a complex financial transaction that requires multiple parties to make it all happen.
You're probably familiar with the parties taking part in the transaction. The most recognizable person in the exchange is the real estate agent. Then, the bank provides the money needed to finance the exchange. And ensuring all details of the transaction are completed and that the title is clear to transfer from the seller to the purchaser is the title company.
So, who makes sure the property is worth the purchase price? 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 licensed, certified, professional appraiser from Milwaukee Appraisal Co./Stowe Appraisals will ensure, you as an interested party, are informed.
The inspection is where an appraisal starts
To determine the true status of the property, it's our duty to first perform a thorough inspection. We must see aspects of the property 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 reasonable buyer would expect them to be. To make sure the stated square footage is accurate and describe the layout of the house, the inspection often entails creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious features - or defects - that would have an impact on the value of the house.
Once the site has been inspected, 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, we gather information on local construction costs, the cost of labor and other elements to determine how much it would cost to construct a property comparable to the one being appraised. This value usually sets the upper limit on what a property would sell for. The cost approach is also the least used predictor of value.
Appraisers get to know the communities in which they work. They innately understand the value of specific features to the people of that area. Then, the appraiser researches recent sales 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 add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject.
In the end, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At Milwaukee Appraisal Co./Stowe Appraisals, we are an authority when it comes to knowing the worth of real estate features in Franklin and Milwaukee County neighborhoods. The sales comparison approach to value is commonly given the most importance when an appraisal is for a home sale.
Valuation Using the Income Approach
A third way of valuing approach to value is sometimes applied when a neighborhood has a measurable number of rental properties. In this case, the amount of income the real estate yields is taken into consideration along with other rents in the area for comparable properties to determine the current value.
Arriving at a Value Conclusion
Combining information from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the property at hand. Note: While the appraised value is probably the best indication of what a house is worth, it may not be the final sales price. Depending on the specific 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.But the appraised value is typically employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. Here's what it all boils down to, an appraiser from Milwaukee Appraisal Co./Stowe Appraisals will help you get the most fair and balanced property value, so you can make wise real estate decisions.