A Description of the Appraisal Process
Buying a house is the most serious investment many of us might ever make. Whether it's a main residence, a seasonal vacation home or one of many rentals, purchasing real property is a detailed financial transaction that requires multiple parties to make it all happen.
Most of the parties involved are very familiar. The real estate agent is the most familiar person in the exchange. Then, the bank provides the money necessary to finance the exchange. And the title company sees to it that all details of the exchange are completed and that a clear title transfers from the seller to the purchaser.
So, who makes sure the value of the property is consistent with the amount being paid? In comes the appraiser. We provide an unbiased estimate of what a buyer might expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Crescent Appraisal Group, Inc. will ensure, you as an interested party, are informed.
Appraisals start with the home inspection
To determine an accurate status of the property, it's our responsibility to first perform a thorough inspection. We must physically view aspects of the property, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed are present and are in the condition a typical person would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is proper and illustrating the layout of the property. Most importantly, we look for any obvious amenities - or defects - that would affect the value of the house.
Once the site has been inspected, we use two or three approaches to determining the value of real property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.
Here, we analyze information on local construction costs, the cost of labor and other elements to derive how much it would cost to construct a property comparable to the one 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.
Appraisers become very familiar with the neighborhoods in which they work. They thoroughly understand the value of specific features to the people of that area. Then, the appraiser looks up 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 fireplaces, room layout, appliance upgrades, extra bathrooms or bedrooms, or quality of construction, we adjust the comparable properties so that they are more accurately in line with the features of subject property.
In the end, 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 valuing features of homes in Metairie and Jefferson, Crescent Appraisal Group, Inc. is your local authority. The sales comparison approach to value is typically given the most consideration when an appraisal is for a home purchase.
Valuation Using the Income Approach
A third way of valuing a property is sometimes employed when an area has a measurable number of rental properties. In this situation, the amount of income the property produces is factored in with income produced by comparable properties to derive the current value.
Arriving at a Value Conclusion
Combining information from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the property in question. It is important to note that while this amount is probably the most reliable indication of what a house is worth, it may not be the final sales price. There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust an offer or listing price up or down. But the appraised value is typically 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 sell the property again. At the end of the day, an appraiser from Crescent Appraisal Group, Inc. will guarantee you discover the most accurate property value, so you can make the most informed real estate decisions.