What Are the Parts of an Appraisal?
Purchasing a house can be the largest transaction most people might ever make. It doesn't matter if a primary residence, a seasonal vacation home or a rental fixer upper, purchasing real property is a complex transaction that requires multiple people working in concert to pull it all off.
Most people are familiar with the parties taking part in the transaction. The most known person in the transaction is the real estate agent. Next, the mortgage company provides the money needed to fund the transaction. And the title company makes sure that all details of the exchange are completed and that a clear title passes from the seller to the purchaser.
So, who's responsible for making sure the real estate is worth 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 property, 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.
Appraisals begin with the home inspection
Our first task at Milwaukee Appraisal Co./Stowe Appraisals is to inspect the property to determine its true status. We must actually view features, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they truly are present and are in the shape a reasonable person would expect them to be. To ensure the stated square footage has not been misrepresented and convey the layout of the property, the inspection often entails creating a sketch of the floorplan. Most importantly, we look for any obvious features - or defects - that would have an impact on the value of the property.
Following the inspection, we use two or three approaches to determining the value of the property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.
Here, the appraiser analyzes information on local building costs, labor rates and other factors to derive how much it would cost to construct a property comparable to the one being appraised. This figure commonly sets the upper limit on what a property would sell for. It's also the least used method.
Appraisers can tell you a lot about the subdivisions in which they appraise. They thoroughly understand the value of specific features to the residents of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the subject in question. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, extra bathrooms or bedrooms, or quality of construction, 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. When it comes to knowing the true worth of features of homes in Franklin and Milwaukee, Milwaukee Appraisal Co./Stowe Appraisals can't be beat. The sales comparison approach to value is usually given the most weight when an appraisal is for a home purchase.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - we may use a third approach to value. In this case, the amount of revenue the property generates is taken into consideration along with income produced by similar properties to determine the current value.
Arriving at a Value Conclusion
Analyzing the data from all applicable approaches, the appraiser is then ready to state an estimated market value for the property in question. Note: While this amount is probably the most reliable indication of what a house is worth, it probably will not be the final sales price. 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.But the appraised value is often 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.