Understanding Appraisals

Getting a home is the most serious financial decision most people could ever encounter. Whether it's where you raise your family, an additional vacation property or an investment, the purchase of real property is a complex financial transaction that requires multiple parties to see it through.

Most people are familiar with the parties having a role in the transaction. The real estate agent is the most known entity in the transaction. Then, the lender provides the money required to bankroll the transaction. And the title company sees to it that all areas of the exchange are completed and that a clear title passes from the seller to the purchaser.

To learn more about appraising, click here to see a short video or call us today to talk about your specific property.

So, who makes sure the value of the real estate is consistent with the amount being paid? This is where you meet 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 licensed, certified, professional appraiser from Regan Leddy Appraisal, LLC. will ensure, you as an interested party, are informed.

The inspection is where an appraisal starts

To determine the true status of the property, it's our duty to first conduct a thorough inspection. We must physically view features, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they indeed are there and are in the shape a typical buyer would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is proper and illustrating the layout of the property. Most importantly, the appraiser identifies any obvious amenities - or defects - that would affect the value of the house.

Following the inspection, we use two or three approaches to determining the value of real property: sales comparison and, in the case of a rental property, an income approach.

Cost Approach

This is where we gather 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 become very familiar with the communities in which they appraise. They thoroughly understand the value of certain features to the homeowners of that area. Then, the appraiser looks up recent sales in close proximity to the subject and finds properties which are 'comparable' to the subject being appraised. By assigning a dollar value to certain items such as fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, we add or subtract from each comparable's sales price so that they more accurately match the features of subject.

For example, if the comparable property has an irrigation system and the subject doesn't, the appraiser may deduct the value of an irrigation system from the sales price of the comparable home.
In the case where the subject has something such as an extra half bath that a comparable doesn't have, the appraiser might add the value of that bath to the comparable property.

A valid estimate of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. When it comes to associating a value with features of homes in Canton and Cherokee, Regan Leddy Appraisal, LLC. is second to none. The sales comparison approach to value is most often awarded the most importance when an appraisal is for a home sale.

Valuation Using the Income Approach

A third method of valuing a house is sometimes employed when an area has a reasonable number of renter occupied properties. In this case, the amount of income the property generates is taken into consideration along with other rents in the area for comparable properties to determine the current value.

Putting It All Together

Analyzing the data from all approaches, the appraiser is then ready to document an estimated market value for the subject property. The estimate of value at the bottom of the appraisal report is not always the final sales price even though it is likely the best indication of what a property is worth. Depending on the individual 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 typically employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. It all comes down to this, an appraiser from Regan Leddy Appraisal, LLC. will guarantee you discover the most fair and balanced property value, so you can make the most informed real estate decisions.