What is an Appraisal?
An unbiased, professional opinion of a property's fair market value
So, who makes sure the real estate is worth the amount being paid?
In comes the appraiser. We provide an unbiased opinion of what a buyer could expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Michigan Certified Residential Appraisers, LLC will ensure you, as an interested party, are informed.
Appraisals start with the home inspection
Our first responsibility at Michigan Certified Residential Appraisers, LLC 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, living areas, etc., to ensure they really are present and are in the shape a reasonable buyer would expect them to be.
The inspection often includes a sketch of the floorplan, ensuring the square footage is accurate and illustrating the layout of the property. Most importantly, the appraiser identifies any obvious features — or defects — that would affect the value of the house.
Following the inspection, we use two or three approaches to determining the value of the property: sales comparison and, in the case of a rental property, an income approach.
Analyzing Comparable Sales
Appraisers get to know the property types in which they appraise. They innately understand the value of specific features to the people of that area. Then, the appraiser researches recent transactions in the vicinity and finds properties which are 'comparable' to the real estate being appraised. 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 the subject property. 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. The sales comparison approach to value is most often awarded the most consideration when an appraisal is for a home sale.
Cost Approach
This is where the appraiser gathers information on local construction costs, the cost of labor and other factors to determine how much it would cost to replace the property being appraised. This estimate often sets the upper limit on what a property would sell for. This method is most credible when used for new construction or new proposed construction only.
Valuation Using the Income Approach
A third way of valuing real estate is sometimes employed when a neighborhood has a measurable number of renter-occupied properties. In this case, the amount of revenue the property generates is factored in with other rents in the area for comparable properties to derive the current value.
The Bottom Line
Combining information from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the property at hand. The estimate of value on the appraisal report is not always the final sales price even though it is likely the best indication of what a property is worth. Regardless, the appraised value is often used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. An appraiser from Michigan Certified Residential Appraisers, LLC will help you get the most accurate property value, so you can make wise real estate decisions.
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