![]() Understanding AppraisalsBuying real estate can be the most significant investment most of us might ever encounter. Whether it's a primary residence, an additional vacation home or a rental fixer upper, purchasing real property is an involved financial transaction that requires multiple people working in concert to see it through. It's likely you are familiar with the parties taking part in the transaction. The real estate agent is the most recognizable face in the transaction. Next, the mortgage company provides the financial capital necessary to fund the exchange. The title company sees to it that all details of the transaction are completed and that a clear title passes from the seller to the buyer. So, who's responsible for making sure the property is worth the purchase price? This is where the appraiser comes in. We provide an unbiased opinion 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 Spencer Appraisal Services, Inc. will ensure, you as an interested party, are informed. Inspecting the subject propertyOur first responsibility at Spencer Appraisal Services, Inc. is to inspect the property to ascertain its true status. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly exist and are in the shape 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, we look for any obvious amenities - or defects - that would have an impact on the value of the house. Following 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. ![]() Replacement CostHere, we gather information on local construction costs, the cost of labor and other factors to figure out how much it would cost to construct a property nearly identical to the one being appraised. This figure usually sets the upper limit on what a property would sell for. It's also the least used predictor of value. ![]() Analyzing Comparable SalesAppraisers are intimately familiar with the subdivisions in which they work. They innately understand the value of certain features to the people of that area. Then, the appraiser researches recent sales in the neighborhood and finds properties which are 'comparable' to the home in question. By assigning a dollar value to certain items such as upgraded appliances, extra bathrooms, additional living area, quality of construction, lot size, we adjust the comparable properties so that they more accurately portray 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 Spencer Appraisal Services, Inc., we are an authority when it comes to knowing the worth of particular items in Abington and Montgomery County neighborhoods. The sales comparison approach to value is typically awarded the most importance when an appraisal is for a home exchange. Valuation Using the Income ApproachA third method of valuing real estate is sometimes employed when an area has a measurable number of renter occupied properties. In this case, the amount of income the real estate generates is taken into consideration along with income produced by comparable properties to derive the current value. ReconciliationCombining information from all approaches, the appraiser is then ready to stipulate an estimated market value for the property in question. Note: While this amount is probably the strongest indication of what a property is worth, it probably will not be the price at which the property closes. There are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust an offer or listing price up or down. Regardless, the appraised value is often employed 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. It all comes down to this, an appraiser from Spencer Appraisal Services, Inc. will help you get the most accurate property value, so you can make profitable real estate decisions. |