What Are the Components of an Appraisal?
A home purchase is the most important investment many may ever encounter. Whether it's where you raise your family, an additional vacation home or one of many rentals, the purchase of real property is a complex transaction that requires multiple people working in concert to see it through.
The majority of the people involved are very familiar. The most recognizable person in the exchange is the real estate agent. Then, the bank provides the financial capital needed to bankroll the transaction. The title company sees to it that all areas of the exchange are completed and that a clear title transfers from the seller to the purchaser.
So, what party makes sure the value of the property 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 parcel of real estate, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Upchurch Appraisals will ensure, you as an interested party, are informed.
The inspection is where an appraisal starts
Our first duty at Upchurch Appraisals is to inspect the property to ascertain its true status. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really exist and are in the condition a reasonable buyer would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is correct and conveying the layout of the property. Most importantly, the appraiser looks for any obvious amenities - or defects - that would affect the value of the house.
Next, after the inspection, 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 we analyze information on local building costs, labor rates and other factors to ascertain how much it would cost to replace the property being appraised. This value often sets the upper limit on what a property would sell for. The cost approach is also the least used predictor of value.
Paired Sales Analysis
Appraisers are intimately familiar with the communities in which they work. They innately understand the value of specific 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 being appraised. By assigning a dollar value to certain items such as upgraded appliances, additional bathrooms, 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.
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 Upchurch Appraisals, we are an authority in knowing the value of real estate features in Myrtle Beach and Horry County neighborhoods. This approach to value is most often given the most consideration when an appraisal is for a real estate purchase.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - the appraiser may use an additional approach to value. In this case, the amount of revenue the real estate produces is factored in with other rents in the area for comparable properties to derive the current value.
Analyzing the data from all applicable approaches, the appraiser is then ready to state an estimated market value for the subject property. The estimate of value on the appraisal report is not necessarily the final sales price even though it is likely the best indication of a property's valueDepending on the specific situations 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 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 put the property on the market again. At the end of the day, an appraiser from Upchurch Appraisals will guarantee you attain the most fair and balanced property value, so you can make wise real estate decisions.