What Are the Components of an Appraisal?
Their home's purchase can be the most serious investment some people will ever encounter. Whether it's where you raise your family, a seasonal vacation home or a rental fixer upper, the purchase of real property is an involved financial transaction that requires multiple people working in concert to make it all happen.
The majority of the participants are quite familiar. The real estate agent is the most known entity in the transaction. Next, the bank provides the financial capital necessary to finance the deal. And the title company ensures that all details of the transaction are completed and that a clear title passes to the buyer from the seller.
So, who makes sure the real estate is worth 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 parcel of real estate, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Chris Jackson Appraisal will ensure, you as an interested party, are informed.
Inspecting the subject property
Our first responsibility at Chris Jackson Appraisal is to inspect the property to ascertain its true status. We must physically see features, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed are there and are in the condition a reasonable person would expect them to be. To make sure the stated square footage has not been misrepresented and illustrate the layout of the home, the inspection often requires creating a sketch of the floorplan. Most importantly, we look for any obvious features - or defects - that would have an impact on the value of the house.
Next, after the inspection, 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 uses 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 value usually sets the upper limit on what a property would sell for. It's also the least used method.
Paired Sales Analysis
Appraisers get to know the communities in which they appraise. They innately understand the value of specific features to the residents of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the home at hand. By assigning a dollar value to certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or extra storage space, we adjust the comparable properties so that they are more accurately in line with 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. At Chris Jackson Appraisal, we are experts in knowing the worth of real estate features in Knoxville and Knox County neighborhoods. This approach to value is commonly given the most importance when an appraisal is for a home purchase.
Valuation Using the Income Approach
A third method of valuing a property is sometimes applied when an area has a reasonable number of rental properties. In this situation, the amount of income the real estate yields is taken into consideration along with other rents in the area for comparable properties to determine 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. The estimate of value on the appraisal report is not necessarily what's being paid for the property even though it is likely the best indication of a property's valueIt'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'. 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 recover in case they had to put the property on the market again. The bottom line is, an appraiser from Chris Jackson Appraisal will help you attain the most accurate property value, so you can make profitable real estate decisions.