Understanding the Appraisal ProcessA home purchase is the most serious transaction many people may ever consider. Whether it's a primary residence, an additional vacation home or a rental fixer upper, purchasing real property is a detailed financial transaction that requires multiple parties to see it through.
Most 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 needed to fund the transaction. The title company ensures that all requirements of the transaction are completed and that a clear title passes to the buyer from the seller.
So what party makes sure the real estate is consistent with the amount being paid? In comes the appraiser. We provide an unbiased opinion 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 professional Massachusetts licensed appraiser from Maroun Bechara-MB Appraisal Services, Inc will ensure you as an interested party are informed.
Appraisals begin with the home inspectionOur first task at Maroun Bechara-MB Appraisal Services, Inc is to inspect the property to ascertain its true status. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, living areas, etc., to ensure they truly are present and are in the shape a typical buyer would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is correct and conveying the layout of the property. Most importantly, we look 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 when determining the value of the property: paired sales analysis and, in the case of a rental property, an income approach.
Cost ApproachThis is where the appraiser pulls information on local building costs, the cost of labor and other factors to figure out how much it would cost to replace the property being appraised. This estimate usually sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.
Sales ComparisonAppraisers can tell you a lot about the communities in which they appraise. We innately understand the value of certain features to the people of that area. Then, the appraiser researches recent transactions in the neighborhood and finds properties which are 'comparable' to the real estate being appraised. Using knowledge of the value of certain items such as square footage, additional 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.
Valuation Using the Income ApproachIn the case of income producing properties - rental houses for example - we may use an additional approach to value. In this situation, the amount of revenue the property generates is taken into consideration along with income produced by neighboring properties to derive the current value.
ReconciliationAnalyzing the data from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. The estimate of value on 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 individual 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. But the appraised value is typically 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. It all comes down to this: An appraiser from Maroun Bechara-MB Appraisal Services, Inc will help you get the most fair and balanced property value, so you can make the most informed real estate decisions.