What goes into an appraisal?Buying a home can be the most important investment many people might ever make. Whether it's a main residence, an additional vacation home or a rental fixer upper, the purchase of real property is an involved financial transaction that requires multiple parties to see it through.
Practically all the participants are quite familiar. The real estate agent is the most familiar person in the exchange. Next, the lender provides the money necessary to finance the exchange. Ensuring all areas of the transaction are completed and that the title is clear to transfer from the seller to the buyer is the title company.
So who's responsible for making sure the value of the real estate is in line with the purchase price? 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 property, where both buyer and seller are informed parties. A professional Illinois licensed appraiser from Glassey and Glassey Appraisal will ensure you as an interested party are informed.
Inspecting the subject propertyOur first responsibility at Glassey and Glassey 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 present and are in the condition a reasonable person would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is proper and conveying the layout of the property, as well as photos. Most importantly, the appraiser identifies any obvious features - or defects - that would have an impact on the value of the house.
Once the site has been inspected, an appraiser employs two or three approaches when determining the value of real property: paired sales analysis and, in the case of a rental property, an income approach.
Cost ApproachThe Cost Approach is most often used for newer homes.Here, the appraiser uses information on local building costs, labor rates and other factors to figure out how much it would cost to build a property comparable to the one being appraised. This estimate often sets the maximum on what a property would sell for. It's also the least used method.
Paired Sales AnalysisAppraisers get to know the communities in which they work. We thoroughly understand the value of particular features to the people of that area. Then, the appraiser looks up recent transactions in the area and finds properties which are 'comparable' to the subject being appraised. By assigning a dollar value to certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or additional storage space, we adjust the comparable properties so that they are more accurately in line with the features of subject property.
Valuation Using the Income ApproachIn the case of income producing properties - rental houses for example - we may use a third approach to value. In this situation, the amount of revenue the real estate produces is factored in with other rents in the area for comparable properties to give an indicator of the current value.
The Bottom LineCombining information from all approaches, or the most appropriate approach;the appraiser is then ready to state an estimated market value for the property at hand. It is important to note that while this amount is probably the best indication of what a house would sell for in an open market, it may not be the price at which the property closes. 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'. Regardless, the appraised value is often used as a guideline for lenders who don't want to loan a buyer more money than they could recover in the event they had to put the property on the market again. The bottom line is: An appraiser from Glassey and Glassey Appraisal will help you get the most fair and balanced property value, so you can make wise real estate decisions.