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Understanding Appraisals

Acquiring real estate is the most important transaction many might ever consider. Whether it's a primary residence, a seasonal 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.

It's likely you are familiar with the parties taking part in the transaction. The real estate agent is the most known person in the exchange. Next, the bank provides the financial capital needed to finance the transaction. And ensuring all aspects of the sale are completed and that the title is clear to transfer to the buyer from the seller 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, what party is responsible for making sure the property is worth 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 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.

Inspecting the subject property

Our first task at The August Group Inc. is to inspect the property to ascertain its true status. We must physically see aspects of the property, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really are present and are in the shape a typical buyer would expect them to be. To ensure the stated size of the property is accurate and describe the layout of the property, the inspection often requires creating a sketch of the floorplan. Most importantly, we look for any obvious amenities - or defects - that would have an impact on the value of the property.

After the inspection, we use 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 Cost

Here, we use information on local building costs, the cost of labor and other factors to determine how much it would cost to replace the property being appraised. This value often sets the maximum on what a property would sell for. The cost approach is also the least used method.

Paired Sales Analysis

Appraisers become very familiar with the subdivisions in which they work. They innately understand the value of specific features to the homeowners of that area. Then, the appraiser researches recent transactions in the area and finds properties which are 'comparable' to the subject in question. 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 are more accurately in line with the features of subject property.

  • If, for example, the comparable property has a storm shelter and the subject does not, the appraiser may deduct the value of a storm shelter from the sales price of the comparable home.
  • In the case where the subject has something such as an extra half bath that a comparable doesn't have, the appraiser might add the value of that bath to the comparable property.

After all differences have been accounted for, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. When it comes to knowing the true value of features of homes in St Louis and Saint Louis, The August Group Inc. can't be beat. This approach to value is usually given the most weight when an appraisal is for a real estate sale.

Valuation Using the Income Approach

A third method of valuing a property is sometimes used when a neighborhood has a reasonable number of renter occupied properties. In this situation, the amount of revenue the real estate yields is factored in with income produced by neighboring properties to give an indicator of the current value.

Coming Up With The Final Value

Examining the data from all applicable approaches, the appraiser is then ready to state an estimated market value for the property in question. The estimate of value on the appraisal report is not necessarily the final sales price even though it is likely the best indication of a property's valueDepending on the individual circumstances 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.Regardless, 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. At the end of the day, an appraiser from The August Group Inc. will guarantee you get the most fair and balanced property value, so you can make wise real estate decisions.