An Overview of the Appraisal ProcessA home purchase can be the most important transaction most of us might ever consider. Whether it's a main residence, a second vacation home or one of many rentals, the purchase of real property is a detailed transaction that requires multiple people working in concert to pull it all off. The majority of the parties involved are very familiar. The most known entity in the exchange is the real estate agent. Next, the lender provides the money required to fund the exchange. And ensuring all areas of the sale are completed and that the title is clear to pass to the buyer from the seller is the title company. So, what party 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 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 C. Gaba Appraisals, LLC will ensure, you as an interested party, are informed. The inspection is where an appraisal beginsOur first task at C. Gaba Appraisals, LLC is to inspect the property to determine its true status. We must see features first hand, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly are present and are in the condition a reasonable person would expect them to be. To ensure the stated size of the property has not been misrepresented and document the layout of the home, the inspection often entails creating a sketch of the floorplan. Most importantly, the appraiser looks for any obvious features - or defects - that would have an impact on the value of the house. Next, after the inspection, an appraiser uses two or three approaches to determining the value of real property: paired sales analysis and, in the case of a rental property, an income approach. Replacement CostThis is where the appraiser pulls information on local building costs, labor rates and other elements to calculate how much it would cost to replace the property being appraised. This value usually sets the upper limit on what a property would sell for. The cost approach is also the least used predictor of value. Analyzing Comparable SalesAppraisers become very familiar with the subdivisions in which they appraise. They innately understand the value of particular features to the residents of that area. Then, the appraiser looks up recent sales in the vicinity and finds properties which are 'comparable' to the property being appraised. Using knowledge of the value of 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 are more accurately in line with the features of subject property.
Once all necessary adjustments have been made, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At C. Gaba Appraisals, LLC, we are experts when it comes to knowing the worth of real estate features in Mobile and Mobile County neighborhoods. The sales comparison approach to value is typically awarded the most weight when an appraisal is for a real estate purchase. Valuation Using the Income ApproachIn the case of income producing properties - rental houses for example - the appraiser may use an additional way of valuing a property. In this case, the amount of revenue the real estate yields is taken into consideration along with other rents in the area for comparable properties to derive the current value. Arriving at a Value ConclusionCombining information from all approaches, the appraiser is then ready to document an estimated market value for the property at hand. It is important to note that while this amount is probably the most reliable indication of what a property is worth, it probably will not be the price at which the property closes. It's not uncommon for prices to be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. Regardless, the appraised value is often used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. Here's what it all boils down to, an appraiser from C. Gaba Appraisals, LLC will help you get the most fair and balanced property value, so you can make the most informed real estate decisions. |