What Are the Parts of an Appraisal?
Their home's purchase is the most serious investment many of us may ever consider. It doesn't matter if a main residence, a second vacation home or an investment, the purchase of real property is a detailed financial transaction that requires multiple people working in concert to make it all happen.
Most people are familiar with the parties taking part in the transaction. The most recognizable entity in the transaction is the real estate agent. Then, the lender provides the money required to bankroll the exchange. The title company ensures that all aspects of the sale are completed and that the title is clear to pass from the seller to the purchaser.
So, what party makes sure the value of the property is in line with the amount being paid? In comes the appraiser. We provide an unbiased opinion of what a buyer might 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 Mannion Appraisals will ensure, you as an interested party, are informed.
The inspection is where an appraisal begins
Our first responsibility at Mannion Appraisals is to inspect the property to determine its true status. We must physically see features, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they really exist and are in the shape a reasonable person would expect them to be. To make sure the stated size of the property has not been misrepresented and describe the layout of the property, the inspection often requires creating a sketch of the floorplan. Most importantly, the appraiser looks for any obvious amenities - or defects - that would affect the value of the house.
Once the site has been inspected, an appraiser uses two or three approaches to determining the value of real property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.
Here, we pull information on local construction costs, the cost of labor and other elements to figure out how much it would cost to build a property nearly identical to the one being appraised. This figure often sets the upper limit on what a property would sell for. It's also the least used predictor of value.
Appraisers get to know the communities in which they work. They thoroughly understand the value of certain features to the residents of that area. Then, the appraiser researches recent transactions in close proximity to the subject and finds properties which are 'comparable' to the home being appraised. 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 more accurately portray the features of subject property.
Once all necessary adjustments have been made, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At Mannion Appraisals, we are an authority in knowing the value of particular items in Oak Lawn and Cook County neighborhoods. The sales comparison approach to value is commonly 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 approach to value. In this situation, the amount of income the property generates is taken into consideration along with income produced by neighboring properties to derive the current value.
Combining information from all approaches, the appraiser is then ready to stipulate an estimated market value for the property at hand. Note: While this amount is probably the most reliable indication of what a property is worth, it probably will not be the final sales price. Prices can always be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. 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. The bottom line is, an appraiser from Mannion Appraisals will help you get the most fair and balanced property value, so you can make the most informed real estate decisions.