Acquiring a house is the biggest financial decision many of us might ever encounter. Whether it's where you raise your family, a second vacation home or one of many rentals, the purchase of real property is an involved financial transaction that requires multiple parties to make it all happen.
The majority of the participants are very familiar. The most familiar entity in the transaction is the real estate agent. Next, the mortgage company provides the money necessary to bankroll the deal. And ensuring all areas of the exchange are completed and that a clear title transfers from the seller to the purchaser is the title company.
So, who makes sure the value of the real estate is consistent 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 licensed, certified, professional appraiser from Biggs Appraisal Services will ensure, you as an interested party, are informed.
Inspecting the subject property
To determine an accurate 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, amenities, etc., to ensure they really exist and are in the shape a reasonable buyer would expect them to be. The inspection often includes a sketch of the property, 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 property.
Following the inspection, an appraiser uses two or three approaches to determining the value of the property: sales comparison and, in the case of a rental property, an income approach.
This is where the appraiser pulls information on local construction costs, the cost of labor and other elements to calculate how much it would cost to replace the property being appraised. This estimate usually sets the upper limit on what a property would sell for. The cost approach is also the least used predictor of value.
Paired Sales Analysis
Appraisers are intimately familiar with the subdivisions in which they appraise. They innately understand the value of certain features to the homeowners of that area. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are 'comparable' to the property being appraised. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, extra 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.
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 Biggs Appraisal Services, we are experts in knowing the value of real estate features in Raymore and Cass County neighborhoods. The sales comparison approach to value is commonly given the most consideration when an appraisal is for a home purchase.
Valuation Using the Income Approach
A third method of valuing a property is sometimes applied when a neighborhood has a reasonable number of rental properties. In this case, the amount of income the property yields is factored in with other rents in the area for comparable properties to give an indicator of the current value.
Analyzing the data from all approaches, the appraiser is then ready to state an estimated market value for the subject property. 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 is worth. There 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 case they had to sell the property again. At the end of the day, an appraiser from Biggs Appraisal Services will help you discover the most accurate property value, so you can make profitable real estate decisions.