Real Estate Appraisals: A Primer
Acquiring a home can be the most serious investment many people could ever consider. Whether it's where you raise your family, a second vacation home or a rental fixer upper, the purchase of real property is a detailed financial transaction that requires multiple parties to see it through.
Most people are familiar with the parties having a role in the transaction. The most recognizable entity in the exchange is the real estate agent. Then, the lender provides the money necessary to bankroll the deal. And ensuring all details of the sale are completed and that the title is clear to pass from the seller to the purchaser is the title company.
So, who makes sure the real estate is worth 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 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.
Inspecting the subject property
Our first duty at Eric C. Hartzog, Appraiser, L.L.C. is to inspect the property to determine its true status. We must physically see aspects of the property, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really are there 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 proper and illustrating the layout of the property. Most importantly, the appraiser looks for any obvious features - or defects - that would have an impact on the value of the property.
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.
This is where we use information on local construction costs, labor rates and other factors to calculate how much it would cost to build a property comparable to the one being appraised. This value usually sets the maximum on what a property would sell for. It's also the least used predictor of value.
Paired Sales Analysis
Appraisers get to know the neighborhoods in which they work. They thoroughly understand the value of certain features to the people of that area. Then, the appraiser researches recent transactions in close proximity to the subject and finds properties which are 'comparable' to the subject at hand. Using knowledge of the value of certain items such as upgraded appliances, additional bathrooms, additional living area, quality of construction, lot size, we add or subtract from each comparable's sales price so that they more accurately match 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 putting a value on features of homes in Baton Rouge and East Baton Rouge, Eric C. Hartzog, Appraiser, L.L.C. can't be beat. This approach to value is most often awarded the most weight when an appraisal is for a home sale.
Valuation Using the Income Approach
A third way of valuing a property is sometimes used when an area has a measurable number of renter occupied properties. In this scenario, the amount of revenue the real estate generates is taken into consideration along with income produced by nearby properties to give an indicator of the current value.
The Bottom Line
Combining information from all approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. Note: While the appraised value is probably the most accurate indication of what a property is worth, it may not be the final sales price. 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 employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. The bottom line is, an appraiser from Eric C. Hartzog, Appraiser, L.L.C. will guarantee you discover the most fair and balanced property value, so you can make profitable real estate decisions.