Real Property Appraisals: A Primer

Getting a house is the most important investment many may ever encounter. Whether it's where you raise your family, a seasonal vacation property or one of many rentals, purchasing real property is an involved transaction that requires multiple parties to pull it all off.


	To learn more about appraising, click here to see a short video or call us today to talk about your specific property.

You're likely to be familiar with the parties having a role in the transaction. The most recognizable person in the exchange is the real estate agent. Next, the lender provides the financial capital required to finance the deal. The title company sees to it that all areas of the transaction are completed and that a clear title passes to the buyer from the seller.

So who's responsible for making sure the value of the real estate is consistent with the amount being paid? This is where the appraiser comes in. 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 professional South Carolina licensed appraiser from Southern Horizons Appraisal, LLC will ensure you as an interested party are informed.

Appraisals begin with the property inspection

Our first responsibility at Southern Horizons Appraisal, LLC is to inspect the property to ascertain 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 truly exist and are in the shape a reasonable person would expect them to be. To make sure the stated square footage is accurate and illustrate the layout of the house, the inspection often requires creating a sketch of the floor plan. Most importantly, the appraiser looks for any obvious features - or defects - that would have an impact on the value of the property.

Following the inspection, 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.

Replacement Cost

Here, we pull information on local construction costs, the cost of labor and other elements to ascertain 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.

Sales Comparison

Appraisers can tell you a lot about the neighborhoods in which they appraise. We thoroughly understand the value of particular features to the residents of that area. Then, the appraiser researches recent transactions in close proximity to the subject and finds properties which are 'comparable' to the real estate at hand. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject property.

Say, for example, the comparable property has a storm shelter and the subject doesn't, the appraiser may deduct the value of a storm shelter from the sales price of the comparable.
If the subject has an extra half-bathroom and the comparable does not, the appraiser might add an amount to the comparable property.

When it comes to putting a value on features of homes in Newberry and Newberry, Southern Horizons Appraisal, LLC can't be beat. The sales comparison approach to value is most often given the most importance when an appraisal is for a home exchange.

Valuation Using the Income Approach

A third way of valuing real estate is sometimes used when an area has a reasonable number of rental properties. In this scenario, the amount of revenue the real estate generates is taken into consideration along with income produced by nearby properties to give an indicator of the current value.

Reconciliation

Examining the data from all 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 what's being paid for the property even though it is likely the best indication of what a property could sell for in an open market. Depending on the specific situations of the buyer or seller, their level of urgency or a buyer's desire for that exact property, the closing price of a home can always be driven 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 the property would likely sell for in an open marketplace. The bottom line is: An appraiser from Southern Horizons Appraisal, LLC will help you discover the most fair and balanced property value, so you can make wise real estate decisions.