What is an appraisal?One's home purchase can be the largest investment many will ever consider. It doesn't matter if it's where you raise your family, a seasonal 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.
The majority of the participants are quite familiar. The most known entity in the transaction is the real estate agent. Next, the bank provides the financial capital required to fund the deal. The title company makes sure that all details of the transaction are completed and that a clear title passes from the seller to the purchaser.
So what party makes sure the value of the real estate is consistent with the amount being paid? This is where you meet the appraiser. We provide an unbiased estimate of what a buyer might expect to pay - or a seller receive - for a property, where both buyer and seller are informed parties. A professional Tennessee licensed appraiser from 1 Tree Real Estate Appraisal Service will ensure you as an interested party are informed.
Inspecting the subject propertyTo determine an accurate status of the property, it's our duty to first conduct 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 really are present 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 conveying 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 house.
After the inspection, an appraiser employs two or three approaches when determining the value of the property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.
Cost ApproachThis is where we use information on local construction costs, labor rates and other elements to determine how much it would cost to replace the property being appraised. This estimate usually sets the maximum on what a property would sell for. The cost approach is also the least used method.
Paired Sales AnalysisAppraisers can tell you a lot about the neighborhoods in which they appraise. We innately understand the value of particular features to the residents of that area. Then, the appraiser researches recent sales in the area and finds properties which are 'comparable' to the subject in question. Using knowledge of the value of 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 more accurately portray the features of subject.
Valuation Using the Income ApproachA third method of valuing a property is sometimes employed when an area has a measurable number of renter occupied properties. In this case, the amount of revenue the real estate produces is taken into consideration along with income produced by similar properties to give an indicator of the current value.
ReconciliationCombining information from all applicable approaches, the appraiser is then ready to state an estimated market value for the property at hand. The estimate of value at the bottom of the appraisal report is not always the final sales price even though it is likely the best indication of what a property could sell for in an open market. 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 often employed as a guideline for lenders who don't want to loan a buyer more money than the property would likely sell for in an open marketplace. The bottom line is: An appraiser from 1 Tree Real Estate Appraisal Service will guarantee you get the most fair and balanced property value, so you can make profitable real estate decisions.