Comprehending Appraisals

Their home's purchase can be the most serious financial decision some might ever make. Whether it's where you raise your family, an additional vacation home or one of many rentals, purchasing real property is a detailed transaction that requires multiple parties to pull it all off.

It's likely you are familiar with the parties taking part in the transaction. The real estate agent is the most recognizable person in the transaction. Next, the mortgage company provides the financial capital required to fund the deal. And ensuring all requirements of the exchange are completed and that the title is clear to transfer from the seller to the buyer is the title company.

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 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 licensed, certified, professional appraiser from R3 Review LLC will ensure, you as an interested party, are informed.

Inspecting the subject property

Our first responsibility at R3 Review LLC is to inspect the property to ascertain its true status. We must actually view features, 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 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 features - or defects - that would have an impact on the value of the house.

Back at the office, we use 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, the cost of labor and other elements to calculate how much it would cost to build a property comparable to the one being appraised. This figure usually sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.

Paired Sales Analysis

Appraisers can tell you a lot about the neighborhoods in which they work. They innately understand the value of specific features to the people 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 adjust the comparable properties so that they more accurately portray the features of subject property.

  • Say, for example, the comparable has an extra half bath that the subject does not, the appraiser may deduct the value of that half bath from the sales price of the comparable.
  • If the subject property has an extra half-bathroom and the comparable does not, the appraiser might add a certain amount to the comparable property.

A true estimate of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. At R3 Review LLC, we are an authority in knowing the worth of particular items in Henderson and Clark County neighborhoods. The sales comparison approach to value is commonly given the most importance when an appraisal is for a home sale.

Valuation Using the Income Approach

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

Arriving at a Value Conclusion

Examining the data from all approaches, the appraiser is then ready to put down an estimated market value for the subject property. It is important to note that while the appraised value is probably the most reliable indication of what a house is worth, it may not be the final sales price. Prices can always be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. Regardless, the appraised value is typically employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. At the end of the day, an appraiser from R3 Review LLC will help you get the most fair and balanced property value, so you can make wise real estate decisions.