What is an appraisal?A home purchase can be the most significant financial decision some people will ever encounter. Whether it's a primary residence, a second vacation home or a rental fixer upper, the purchase of real property is a complex transaction that requires multiple people working in concert to pull it all off.
Practically all the parties participating are quite familiar. The real estate agent is the most known entity in the transaction. Then, the bank provides the financial capital required to fund the transaction. The title company ensures all requirements of the exchange are completed and that the title is clear to pass from the seller to the buyer is the title company.
So what party is responsible for making sure the property is worth 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 property, where both buyer and seller are informed parties. A professional Nebraska licensed appraiser from Faden Appraisal will ensure you as an interested party are informed.
The inspection is where an appraisal beginsTo ascertain an accurate status of the property, it's our duty to first conduct a thorough inspection. We must physically see features, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly are there and are in the condition a typical person would expect them to be. To make sure the stated size of the property is accurate and describe the layout of the home, the inspection often includes creating a sketch of the floor plan. Most importantly, the appraiser looks for any obvious amenities - or defects - that would affect the value of the property.
After the inspection, an appraiser uses two or three approaches to determining the value of the property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.
Replacement CostHere, we analyze information on local construction costs, labor rates and other factors to ascertain how much it would cost to replace the property being appraised. This value usually sets the maximum on what a property would sell for. It's also the least used method.
Paired Sales AnalysisAppraisers get to know the communities in which they appraise. They thoroughly understand the value of specific features to the people of that area. Then, the appraiser researches recent transactions in the area and finds properties which are 'comparable' to the real estate at hand. 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 add or subtract from each comparable's sales price so that they more accurately match the features of subject.
An opinion of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. At Faden Appraisal, we are experts in knowing the worth of real estate features in Lincoln and Lancaster County neighborhoods. This approach to value is usually given the most weight when an appraisal is for a real estate sale.
Valuation Using the Income ApproachIn 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 property yields is taken into consideration along with other rents in the area for comparable properties to give an indicator of the current value.
The Bottom LineExamining the data from all approaches, the appraiser is then ready to stipulate an estimated market value for the property at hand. 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 what a property is worth. Prices can always be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. But the appraised value is often employed 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 put the property on the market again. It all comes down to this: An appraiser from Faden Appraisal will guarantee you discover the most fair and balanced property value, so you can make the most informed real estate decisions.