Home Appraisals: A PrimerGetting a house can be the most significant investment some of us might ever encounter. Whether it's where you raise your family, a seasonal vacation home or an investment, purchasing real property is a detailed financial transaction that requires multiple parties to make it all happen.
Most of the participants are quite familiar. The real estate agent is the most known person in the exchange. Then, the bank provides the financial capital required to fund the deal. The title company makes sure that all requirements of the sale are completed and that the title is clear to transfer from the seller to the purchaser.
So who's responsible for making sure the real estate is worth the purchase price? 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 professional Tennessee licensed appraiser from Cook's Appraisal Service will ensure you as an interested party are informed.
The inspection is where an appraisal startsTo determine an accurate status of the property, it's our responsibility to first perform a thorough inspection. We must physically see aspects of the property, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly exist and are in the shape a typical buyer would expect them to be. To make sure the stated size of the property is accurate and illustrate the layout of the house, the inspection often includes creating a sketch of the floor plan. Most importantly, we identify any obvious features - or defects - that would have an impact on the value of the house.
Following the inspection, we use two or three approaches to determining the value of the property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.
Cost ApproachHere, we analyze information on local construction costs, the cost of labor and other factors to ascertain how much it would cost to replace the property being appraised. This figure commonly sets the maximum on what a property would sell for. The cost approach is also the least used method.
Paired Sales AnalysisAppraisers can tell you a lot about the communities in which they work. They thoroughly understand the value of certain features to the people of that area. Then, the appraiser researches recent sales 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 upgraded appliances, extra bathrooms, an 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 property.
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 Cook's Appraisal Service, we are experts in knowing the worth of real estate features in Clarksville and Montgomery County neighborhoods. This approach to value is typically awarded the most weight when an appraisal is for a real estate exchange.
Valuation Using the Income ApproachA third way of valuing approach to value is sometimes applied when an area has a reasonable number of renter occupied properties. In this situation, the amount of income the real estate produces is taken into consideration along with income produced by similar properties to derive the current value.
The Bottom LineCombining information from all approaches, the appraiser is then ready to document an estimated market value for the property in question. The estimate of value on the appraisal report is not necessarily what's being paid for the property even though it is likely the best indication of a property's value 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. At the end of the day: An appraiser from Cook's Appraisal Service will help you attain the most fair and balanced property value, so you can make wise real estate decisions.