Real Property Appraisals: A Primer
Their home's purchase is the most serious investment many may ever make. It doesn't matter if where you raise your family, a seasonal vacation property or one of many rentals, purchasing real property is a detailed transaction that requires multiple people working in concert to pull it all off.
The majority of the parties participating are quite familiar. The most familiar person in the transaction is the real estate agent. Next, the lender provides the financial capital needed to fund the transaction. And ensuring all requirements of the transaction are completed and that a clear title passes from the seller to the buyer is the title company.
So, who makes sure the property is worth the amount being paid? In comes the appraiser. We provide an unbiased opinion 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 CCM Appraisal Systems, LLC will ensure, you as an interested party, are informed.
Appraisals begin with the home inspection
Our first duty at CCM Appraisal Systems, LLC is to inspect the property to ascertain its true status. We must physically view features, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they indeed exist and are in the condition a typical person would expect them to be. To make sure the stated square footage is accurate and illustrate the layout of the property, the inspection often includes creating a sketch of the floorplan. Most importantly, we identify any obvious features - or defects - that would affect the value of the property.
Back at the office, an appraiser uses two or three approaches to determining the value of the property: sales comparison and, in the case of a rental property, an income approach.
This is where the appraiser analyzes information on local construction costs, labor rates and other elements to derive how much it would cost to build a property similar to the one being appraised. This value commonly sets the upper limit on what a property would sell for. The cost approach is also the least used method.
Appraisers are intimately familiar with the neighborhoods in which they work. They innately understand the value of particular features to the people of that area. Then, the appraiser looks up recent sales in the area and finds properties which are 'comparable' to the real estate being appraised. Using knowledge of the value of certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or extra storage space, we adjust the comparable properties so that they more accurately match the features of subject.
An opinion of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. When it comes to knowing the true worth of features of homes in Mounds View and Ramsey, CCM Appraisal Systems, LLC is second to none. The sales comparison approach to value is usually awarded the most consideration when an appraisal is for a home exchange.
Valuation Using the Income Approach
A third method of valuing real estate is sometimes employed when a neighborhood has a reasonable number of renter occupied properties. In this scenario, the amount of income the property generates is taken into consideration along with income produced by nearby properties to determine the current value.
The Bottom Line
Combining information from all applicable approaches, the appraiser is then ready to document an estimated market value for the subject property. Note: While the appraised value 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'. Regardless, the appraised value is typically used 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 CCM Appraisal Systems, LLC will help you attain the most accurate property value, so you can make profitable real estate decisions.