What are the components of an appraisal?One's home purchase is the most significant transaction most people might ever encounter. Whether it's where you raise your family, a seasonal vacation property or an investment, purchasing real property is an involved financial transaction that requires multiple parties to make it all happen.
The majority of the participants are quite familiar. The most known face in the exchange is the real estate agent. Then, the mortgage company provides the money necessary to fund the deal. The title company ensures that all requirements of the exchange are completed and that the title is clear to pass to the buyer from the seller.
So what party makes sure the real estate is consistent with the purchase price? In comes the appraiser. 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 professional Iowa licensed appraiser from Northwest Iowa Appraisals will ensure you as an interested party are informed.
The inspection is where an appraisal beginsTo determine the true status of the property, it's our duty to first conduct a thorough inspection. We must physically see features, such as the number of bedrooms and bathrooms, the location, living areas, etc., to ensure they truly are there and are in the condition a typical person would expect them to be. To make sure the stated size of the property has not been misrepresented and illustrate the layout of the home, the inspection often entails creating a sketch of the floor plan. Most importantly, the appraiser looks for any obvious features - or defects - that would affect the value of the property.
Following the inspection, we use two or three approaches when determining the value of the property: paired sales analysis and, in the case of a rental property, an income approach.
Cost ApproachHere, we gather information on local construction costs, labor rates and other elements to ascertain how much it would cost to replace the property being appraised. This estimate commonly sets the maximum on what a property would sell for. It's also the least used predictor of value.
Paired Sales AnalysisAppraisers get to know the subdivisions in which they appraise. We innately understand the value of certain features to the people of that area. Then, the appraiser researches recent transactions 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 square footage, additional bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject property.
Valuation Using the Income ApproachA third method of valuing approach to value is sometimes employed when an area has a reasonable number of rental properties. In this situation, the amount of income the property generates is taken into consideration along with other rents in the area for comparable properties to derive the current value.
Putting It All TogetherExamining 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 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 market value There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust the final price up or down. 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 get back in case they had to sell the property again. It all comes down to this: An appraiser from Northwest Iowa Appraisals will help you attain the most accurate property value, so you can make wise real estate decisions.