An Overview of AppraisalsA home purchase can be the most significant financial decision some people could 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 detailed transaction that requires multiple parties to pull it all off.
Most people are familiar with the parties taking part in the transaction. The real estate agent is the most familiar face in the transaction. Then, the bank provides the financial capital necessary to fund the transaction. The title company makes sure that all areas of the sale are completed and that the title is clear to pass to the buyer from the seller.
So what party makes sure the value of the property is in line with the purchase price? In comes the appraiser. We provide an unbiased estimate of what a buyer could expect to pay - or a seller receive - for a parcel of real estate, where both buyer and seller are informed parties. A professional Louisiana licensed appraiser from Frances C. Fredieu will ensure you as an interested party are informed.
The inspection is where an appraisal beginsTo ascertain the true status of the property, it's our duty to first conduct a thorough inspection. We must physically see aspects of the property, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really are there and are in the condition a reasonable buyer would expect them to be. To make sure the stated square footage has not been misrepresented and document the layout of the property, the inspection often includes creating a sketch of the floor plan. Most importantly, we identify any obvious amenities - or defects - that would have an impact on the value of the property.
Next, after the inspection, we use two or three approaches to determining the value of the property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.
Replacement CostThis is where the appraiser analyzes information on local construction costs, labor rates and other elements to figure out how much it would cost to construct a property similar to the one being appraised. This figure often sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.
Analyzing Comparable SalesAppraisers are intimately familiar with the communities in which they appraise. They thoroughly understand the value of certain features to the residents of that area. Then, the appraiser researches recent transactions in the area and finds properties which are 'comparable' to the subject at hand. By assigning a dollar value to certain items such as square footage, additional bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we add or subtract from each comparable's sales price so that they more accurately match the features of 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. At Frances C. Fredieu, we are an authority when it comes to knowing the value of real estate features in Forest Hill and Rapides County neighborhoods. This approach to value is most often awarded the most importance when an appraisal is for a real estate sale.
Valuation Using the Income ApproachIn the case of income producing properties - rental houses for example - we may use an additional way of valuing a property. In this case, the amount of income the real estate produces is factored in with income produced by comparable properties to derive the current value.
Arriving at a Value ConclusionAnalyzing the data from all approaches, the appraiser is then ready to state an estimated market value for the property in question. The estimate of value on the appraisal report is not always the final sales price even though it is likely the best indication of a property's value Prices can always be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. But the appraised value is typically used 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. The bottom line is: An appraiser from Frances C. Fredieu will help you get the most accurate property value, so you can make wise real estate decisions.