Comprehending Appraisals

Buying a house is the most serious financial decision most of us might ever consider. It doesn't matter if where you raise your family, an additional vacation property or an investment, purchasing real property is a detailed financial transaction that requires multiple parties to pull it all off.

It's likely you are familiar with the parties having a role in the transaction. The most recognizable person in the transaction is the real estate agent. Next, the bank provides the money necessary to bankroll the deal. And the title company ensures that all details of the transaction are completed and that a clear title passes from the seller to the buyer.

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

So, who's responsible for making sure the property is worth the amount being paid? 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 property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from McGuire Appraisals LLC will ensure, you as an interested party, are informed.

Inspecting the subject property

Our first task at McGuire Appraisals LLC is to inspect the property to determine its true status. We must see features hands on, 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 person 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 amenities - or defects - that would have an impact on the value of the house.

After the inspection, an appraiser uses two or three approaches to determining the value of real property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.

Replacement Cost

This is where the appraiser gathers information on local building costs, labor rates and other factors to calculate how much it would cost to construct a property comparable 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.

Sales Comparison

Appraisers are intimately familiar with the subdivisions in which they work. They innately 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 property at hand. Using knowledge of the value of certain items such as square footage, extra 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 portray the features of subject property.

  • If, for example, the comparable property has a storm shelter and the subject doesn't, the appraiser may subtract 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.

Once all necessary adjustments have been made, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At McGuire Appraisals LLC, we are experts when it comes to knowing the value of particular items in Fort Smith and Sebastian County neighborhoods. The sales comparison approach to value is usually given the most weight when an appraisal is for a real estate sale.

Valuation Using the Income Approach

A third method of valuing real estate is sometimes employed when an area has a measurable number of renter occupied properties. In this scenario, the amount of revenue the property generates is factored in with other rents in the area for comparable properties to derive the current value.

Coming Up With The Final Value

Analyzing the data from all approaches, the appraiser is then ready to stipulate 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 valueThere are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust the final price up or down. Regardless, the appraised value is often used as a guideline for lenders who don't want to loan a buyer more money than they could recover in the event they had to sell the property again. At the end of the day, an appraiser from McGuire Appraisals LLC will guarantee you attain the most accurate property value, so you can make the most informed real estate decisions.