Understanding the Appraisal Process
A home purchase can be the most significant transaction many might ever encounter. It doesn't matter if a primary residence, an additional vacation home or an investment, purchasing real property is a complex financial transaction that requires multiple people working in concert to make it all happen.
The majority of the people participating are quite familiar. The most known face in the exchange is the real estate agent. Next, the mortgage company provides the money necessary to bankroll the transaction. And the title company ensures that all requirements of the transaction are completed and that the title is clear to pass to the buyer from the seller.
So, what party makes sure the value of the property is in line with the amount being paid? In comes 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 Ferrari Appraisals LLC will ensure, you as an interested party, are informed.
The inspection is where an appraisal starts
Our first responsibility at Ferrari Appraisals LLC is to inspect the property to determine its true status. We must actually view aspects of the property, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly exist and are in the condition a typical 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 property.
Once the site has been inspected, we use 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.
Here, the appraiser analyzes information on local building costs, labor rates and other elements to derive how much it would cost to build a property comparable to the one being appraised. This value often sets the upper limit on what a property would sell for. It's also the least used predictor of value.
Analyzing Comparable Sales
Appraisers become very familiar with the subdivisions in which they appraise. They innately understand the value of particular 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 home in question. Using knowledge of the value of certain items such as upgraded appliances, extra bathrooms, additional living area, quality of construction, lot size, we add or subtract from each comparable's sales price so that they more accurately portray the features of subject.
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. When it comes to associating a value with features of homes in Marlborough and Hartford, Ferrari Appraisals LLC is second to none. This approach to value is usually awarded the most consideration when an appraisal is for a real estate exchange.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - we may use an additional way of valuing a house. In this scenario, the amount of revenue the property produces is factored in with other rents in the area for comparable properties to determine the current value.
Coming Up With The Final Value
Combining information from all applicable approaches, the appraiser is then ready to document an estimated market value for the property at hand. Note: While this amount is probably the most accurate indication of what a house is worth, it may not be the price at which the property closes. Prices can always be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. But 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 the event they had to sell the property again. It all comes down to this, an appraiser from Ferrari Appraisals LLC will guarantee you attain the most accurate property value, so you can make profitable real estate decisions.