What Is an Appraisal?
Getting a home is the most significant financial decision most people may ever make. It doesn't matter if where you raise your family, an additional vacation home or an investment, purchasing real property is an involved transaction that requires multiple people working in concert to pull it all off.
You're probably familiar with the parties having a role in the transaction. The real estate agent is the most known person in the exchange. Then, the bank provides the money needed to finance the transaction. And ensuring all areas of the exchange are completed and that a clear title transfers to the buyer from the seller is the title company.
So, who's responsible for making sure the value of the property is consistent with the purchase price? 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.
The inspection is where an appraisal starts
Our first responsibility at Eric C. Hartzog, Appraiser, L.L.C. is to inspect the property to ascertain its true status. We must see features first hand, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they truly exist and are in the shape a typical person would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is correct and illustrating the layout of the property. Most importantly, the appraiser looks for any obvious amenities - or defects - that would have an impact on the value of the property.
Next, after the inspection, an appraiser uses two or three approaches to determining the value of real property: sales comparison and, in the case of a rental property, an income approach.
Here, we gather information on local building costs, the cost of labor and other factors to calculate how much it would cost to construct a property nearly identical to the one being appraised. This estimate usually sets the upper limit on what a property would sell for. It's also the least used method.
Analyzing Comparable Sales
Appraisers get to know the neighborhoods in which they appraise. They thoroughly understand the value of specific features to the residents of that area. Then, the appraiser looks up recent sales in the area and finds properties which are 'comparable' to the real estate at hand. By assigning a dollar value to 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.
An opinion of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. At Eric C. Hartzog, Appraiser, L.L.C., we are an authority when it comes to knowing the value of real estate features in Baton Rouge and East Baton Rouge County neighborhoods. The sales comparison approach to value is most often awarded the most weight when an appraisal is for a home purchase.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - the appraiser may use an additional approach to value. In this case, the amount of income the real estate yields is factored in with income produced by similar properties to determine the current value.
Putting It All Together
Examining the data from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the property at hand. Note: While the appraised value is probably the strongest indication of what a house is worth, it may not be the price at which the property closes. There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust the final price up or down. Regardless, 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 case they had to sell the property again. It all comes down to this, an appraiser from Eric C. Hartzog, Appraiser, L.L.C. will help you discover the most accurate property value, so you can make profitable real estate decisions.