What is an appraisal?A home purchase can be the most serious investment some of us might ever consider. It doesn't matter if it's where you raise your family, an additional vacation property or one of many rentals, the purchase of real property is a detailed transaction that requires multiple parties to make it all happen.
You're likely to be familiar with the parties taking part in the transaction. The most known entity in the transaction is the real estate agent. Next, the bank provides the money needed to bankroll the deal. Ensuring all details of the exchange are completed and that a clear title passes from the seller to the purchaser is the title company.
So who makes sure the value of the real estate is in line with the amount being paid? This is where the appraiser comes in. 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 professional Illinois licensed appraiser from James E. Batis & Associates will ensure you as an interested party are informed.
Inspecting the subject propertyOur first duty at James E. Batis & Associates is to inspect the property to ascertain its true status. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really are there and are in the shape a reasonable 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 includes creating a sketch of the floor plan. 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, an appraiser employs two or three approaches when determining the value of the property: sales comparison and, in the case of a rental property, an income approach.
Replacement CostThis is where the appraiser analyzes information on local building costs, labor rates and other elements to determine how much it would cost to replace the property being appraised. This figure often sets the maximum on what a property would sell for. It's also the least used method.
Paired Sales AnalysisAppraisers can tell you a lot about the subdivisions in which they appraise. We innately understand the value of certain features to the homeowners of that area. Then, the appraiser looks up recent transactions in the vicinity and finds properties which are 'comparable' to the real estate in question. By assigning a dollar value to certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or extra 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.
Valuation Using the Income ApproachA third method of valuing real estate is sometimes applied when an area has a reasonable number of renter occupied properties. In this scenario, the amount of income the real estate generates is taken into consideration along with income produced by neighboring properties to derive the current value.
The Bottom LineCombining information from all applicable approaches, the appraiser is then ready to state an estimated market value for the property at hand. The estimate of value at the bottom of the appraisal report is not always the final sales price even though it is likely the best indication of what a property could sell for in an open market. There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust the final price up or down. Regardless, the appraised value is often employed as a guideline for lenders who don't want to loan a buyer more money than they could get back in case they had to sell the property again. The bottom line is: An appraisal from James E. Batis & Associates will help you get the most fair and balanced property value, so you can make the most informed real estate decisions.