Real Estate Appraisals: A PrimerPurchasing a home is the most important transaction most will ever make. Whether it's a primary residence, a seasonal vacation property or an investment, purchasing real property is a detailed transaction that requires multiple people working in concert to see it through.
You're probably familiar with the parties having a role in the transaction. The real estate agent is the most familiar entity in the transaction. Next, the bank provides the financial capital needed to bankroll the deal. The title company sees to it that all aspects of the transaction are completed and that a clear title transfers to the buyer from the seller.
So who's responsible for making sure the value of the real estate is consistent with the amount being paid? In comes the appraiser. We provide an unbiased opinion of what a buyer might expect to pay - or a seller receive - for a parcel of real estate, where both buyer and seller are informed parties. A professional South Carolina licensed appraiser from Dogwood Appraisals, LLC. will ensure you as an interested party are informed.
The inspection is where an appraisal beginsTo 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, and so on, to ensure they truly are there and are in the condition a reasonable person 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, we identify any obvious features - or defects - that would affect the value of the house.
Once the site has been inspected, an appraiser uses two or three approaches to determining the value of the property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.
Replacement CostHere, the appraiser uses information on local building costs, the cost of labor and other elements to derive how much it would cost to construct a property similar to the one being appraised. This value commonly sets the maximum on what a property would sell for. The cost approach is also the least used method.
Paired Sales AnalysisAppraisers are intimately familiar with the subdivisions in which they work. They thoroughly understand the value of specific features to the residents of that area. Then, the appraiser researches recent transactions in close proximity to the subject and finds properties which are 'comparable' to the real estate at hand. Using knowledge of the value of certain items such as square footage, additional bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject.
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. At Dogwood Appraisals, LLC., we are an authority when it comes to knowing the worth of particular items in Hilton Head Island and Beaufort County neighborhoods. This approach to value is typically awarded the most consideration when an appraisal is for a home exchange.
Valuation Using the Income ApproachIn the case of income producing properties - rental houses for example - the appraiser may use a third approach to value. In this scenario, the amount of revenue the property produces is factored in with income produced by similar properties to give an indicator of the current value.
Putting It All TogetherCombining information from all approaches, the appraiser is then ready to state an estimated market value for the subject property. The estimate of value at the bottom of the appraisal report is not always what's being paid for the property even though it is likely the best indication of what a property is worth. 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 typically 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 Dogwood Appraisals, LLC. will help you discover the most fair and balanced property value, so you can make profitable real estate decisions.