What Is an Appraisal?
Their home's purchase can be the largest financial decision many will ever consider. It doesn't matter if a primary residence, a second vacation home or a rental fixer upper, purchasing real property is an involved transaction that requires multiple parties to make it all happen.
It's likely you are familiar with the parties taking part in the transaction. The real estate agent is the most familiar face in the transaction. Then, the mortgage company provides the money required to fund the deal. And ensuring all areas of the sale are completed and that a clear title passes to the buyer from the seller is the title company.
So, who makes sure the value of the property is consistent with the amount being paid? This is where the appraiser comes in. 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 The August Group Inc. will ensure, you as an interested party, are informed.
Appraisals begin with the home inspection
Our first responsibility at The August Group Inc. is to inspect the property to ascertain its true status. We must actually see features, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they truly are there and are in the shape a reasonable buyer would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is proper and conveying the layout of the property. 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 real property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.
This is where the appraiser analyzes information on local building costs, the cost of labor and other elements to derive 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 method.
Paired Sales Analysis
Appraisers can tell you a lot about the subdivisions in which they appraise. They thoroughly understand the value of specific features to the homeowners of that area. Then, the appraiser researches recent transactions in close proximity to the subject and finds properties which are 'comparable' to the subject being appraised. 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.
A true estimate of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. At The August Group Inc., we are experts when it comes to knowing the value of particular items in St Louis and Saint Louis County neighborhoods. This approach to value is typically given the most consideration when an appraisal is for a home sale.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - we may use a third way of valuing a house. In this scenario, the amount of income the real estate produces is factored in with income produced by similar properties to give an indicator of the current value.
Combining information from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. Note: While this amount is probably the best indication of what a property is worth, it may 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 typically employed 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. At the end of the day, an appraiser from The August Group Inc. will help you attain the most accurate property value, so you can make the most informed real estate decisions.