Comprehending Appraisals

Their home's purchase is the most serious transaction most might ever consider. Whether it's where you raise your family, a second vacation property or a rental fixer upper, purchasing real property is an involved transaction that requires multiple people working in concert to pull it all off.

You're likely to be familiar with the parties having a role in the transaction. The most known face in the transaction is the real estate agent. Then, the bank provides the financial capital needed to bankroll the deal. The title company makes sure that all areas of the transaction are completed and that the title is clear to transfer 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 makes sure the property is worth the purchase price? This is where you meet the appraiser. We provide an unbiased estimate of what a buyer might 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 The August Group Inc. will ensure, you as an interested party, are informed.

Appraisals begin with the home inspection

Our first task at The August Group Inc. is to inspect the property to ascertain its true status. We must physically see features, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they truly 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, we identify any obvious features - or defects - that would affect the value of the house.

Following the inspection, we use two or three approaches to determining the value of the property: sales comparison and, in the case of a rental property, an income approach.

Replacement Cost

Here, we pull information on local construction costs, labor rates and other factors to ascertain how much it would cost to build a property similar to the one being appraised. This estimate commonly sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.

Analyzing Comparable Sales

Appraisers are intimately familiar with the neighborhoods in which they appraise. 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 subject in question. Using knowledge of the value of certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or additional storage space, 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 has a fireplace and the subject doesn't, the appraiser may deduct the value of a fireplace from the sales price of the comparable home.
However, 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 could sell for can only be determined once all differences between the comps and the subject have been evaluated. When it comes to knowing the true worth of features of homes in St Louis and Saint Louis, The August Group Inc. is second to none. This approach to value is typically given the most consideration when an appraisal is for a real estate exchange.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - the appraiser may use an additional approach to value. In this situation, the amount of income the real estate produces is factored in with other rents in the area for comparable properties to determine the current value.

Coming Up With The Final Value

Examining the data from all approaches, the appraiser is then ready to put down an estimated market value for the subject property. The estimate of value on the appraisal report is not necessarily what's being paid for the property even though it is likely the best indication of a property's valueThere are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust an offer or listing price up or down. But the appraised value is typically used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. It all comes down to this, an appraiser from The August Group Inc. will guarantee you discover the most accurate property value, so you can make wise real estate decisions.