Real Property Appraisals: A Primer
A home purchase is the most significant financial decision many people might ever consider. It doesn't matter if where you raise your family, a seasonal vacation home or an investment, purchasing real property is an involved financial transaction that requires multiple people working in concert to make it all happen.
You're likely to be familiar with the parties taking part in the transaction. The most recognizable entity in the transaction is the real estate agent. Then, the bank provides the money needed to bankroll the transaction. And the title company ensures that all areas of the exchange are completed and that a clear title passes from the seller to the purchaser.
So, who makes sure the value of the real estate is in line with 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 property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Appraisal Express HI, LLC will ensure, you as an interested party, are informed.
Inspecting the subject property
Our first responsibility at Appraisal Express HI, LLC 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 truly are there 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 illustrate the layout of the house, the inspection often requires creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious features - or defects - that would have an impact on the value of the house.
Following the inspection, an appraiser uses two or three approaches to determining the value of the property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.
Here, the appraiser analyzes information on local construction costs, the cost of labor and other factors to calculate how much it would cost to construct a property nearly identical to the one being appraised. This estimate commonly sets the upper limit on what a property would sell for. It's also the least used predictor of value.
Paired Sales Analysis
Appraisers become very 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 looks up recent sales in close proximity to the subject and finds properties which are 'comparable' to the property at hand. 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 are more accurately in line with the features of subject property.
After all differences have been accounted for, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At Appraisal Express HI, LLC, we are an authority when it comes to knowing the worth of real estate features in Kihei and Maui County neighborhoods. The sales comparison approach to value is most often given the most weight when an appraisal is for a home exchange.
Valuation Using the Income Approach
A third way of valuing real estate is sometimes used when a neighborhood has a reasonable number of rental properties. In this situation, the amount of income the property generates is factored in with other rents in the area for comparable properties to determine the current value.
Putting It All Together
Examining the data from all approaches, the appraiser is then ready to put down an estimated market value for the property at hand. Note: While the appraised value is probably the strongest indication of what a house is worth, it probably will not be the final sales price. Depending on the individual circumstances of the buyer or seller, their level of urgency or a buyer's desire for that exact property, the closing price of a home can always be driven up or down.Regardless, the appraised value is often 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 Appraisal Express HI, LLC will guarantee you attain the most accurate property value, so you can make profitable real estate decisions.