Getting a house can be the most serious transaction some people might ever make. It doesn't matter if where you raise your family, a second vacation property or an investment, the purchase of real property is a complex financial transaction that requires multiple people working in concert to pull it all off.
Practically all the people involved are very familiar. The most recognizable person in the transaction is the real estate agent. Then, the lender provides the financial capital needed to fund the deal. And ensuring all areas of the sale are completed and that the title is clear to transfer from the seller to the purchaser is the title company.
So, what party makes sure the real estate is worth the amount being paid? This is where you meet the appraiser. We provide an unbiased estimate 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 Eric C. Hartzog, Appraiser, L.L.C. will ensure, you as an interested party, are informed.
The inspection is where an appraisal begins
To determine an accurate status of the property, it's our duty to first complete a thorough inspection. We must see features hands on, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they truly are there and are in the shape a typical buyer would expect them to be. To make sure the stated size of the property is accurate and document the layout of the property, the inspection often entails 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.
Back at the office, we use two or three approaches to determining the value of the property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.
This is where we pull information on local building costs, labor rates and other factors to determine 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 predictor of value.
Analyzing Comparable Sales
Appraisers become very familiar with the neighborhoods in which they appraise. They innately understand the value of certain features to the people of that area. Then, the appraiser researches recent transactions in the neighborhood and finds properties which are 'comparable' to the home 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 true estimate of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. When it comes to knowing the true worth of features of homes in Baton Rouge and East Baton Rouge, Eric C. Hartzog, Appraiser, L.L.C. is second to none. The sales comparison approach to value is usually awarded the most consideration when an appraisal is for a home exchange.
Valuation Using the Income Approach
A third method of valuing a house is sometimes employed when an area has a measurable number of renter occupied properties. In this case, the amount of income the real estate produces is taken into consideration along with income produced by neighboring properties to give an indicator of the current value.
Putting It All Together
Combining information from all approaches, the appraiser is then ready to document an estimated market value for the subject property. 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 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'. 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 Eric C. Hartzog, Appraiser, L.L.C. will guarantee you get the most fair and balanced property value, so you can make profitable real estate decisions.