What Are the Parts of an Appraisal?
Getting real estate is the largest financial decision some will ever encounter. It doesn't matter if a main residence, a seasonal vacation home or one of many rentals, purchasing real property is a detailed financial transaction that requires multiple parties to see it through.
Most of the participants are very familiar. The real estate agent is the most recognizable face in the exchange. Then, the bank provides the money necessary to fund the exchange. And the title company sees to it that all aspects of the transaction are completed and that a clear title transfers from the seller to the buyer.
So, what party makes sure the value of the real estate is consistent with the amount being paid? This is where the appraiser comes in. We provide an unbiased opinion of what a buyer could expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from C L Harper & Associates will ensure, you as an interested party, are informed.
Inspecting the subject property
Our first task at C L Harper & Associates is to inspect the property to determine its true status. We must actually see features, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they truly exist and are in the condition a reasonable buyer would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is correct and conveying the layout of the property. Most importantly, the appraiser identifies 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 real property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.
This is where we analyze information on local building costs, labor rates and other elements to calculate how much it would cost to build a property comparable to the one being appraised. This figure commonly sets the upper limit on what a property would sell for. The cost approach is also the least used method.
Paired Sales Analysis
Appraisers are intimately familiar with the communities in which they appraise. They innately understand the value of particular features to the people of that area. Then, the appraiser researches recent transactions in close proximity to the subject and finds properties which are 'comparable' to the property being appraised. Using knowledge of the value of certain items such as upgraded appliances, additional bathrooms, additional living area, quality of construction, lot size, we adjust the comparable properties so that they more accurately match the features of subject property.
A valid estimate of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. At C L Harper & Associates, we are experts when it comes to knowing the value of real estate features in Corpus Christi and Nueces County neighborhoods. This approach to value is most often given the most importance when an appraisal is for a real estate exchange.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - we may use an additional way of valuing a house. In this situation, the amount of revenue the real estate yields is factored in with other rents in the area for comparable properties to derive the current value.
Examining the data from all applicable approaches, the appraiser is then ready to put down an estimated market value for the subject property. The estimate of value at the bottom of the appraisal report is not necessarily the final sales price even though it is likely the best indication of what a property is worth. 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 used as a guideline for lenders who don't want to loan a buyer more money than they could recover in the event they had to sell the property again. It all comes down to this, an appraiser from C L Harper & Associates will help you discover the most accurate property value, so you can make profitable real estate decisions.