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Common Approaches that a St. Cloud Appraiser May Use When Evaluating Your Property
Most of property purchases done today are done through secondary financing from commercial lending institutions. Because of the rising cases of foreclosure and the tough economic times that have characterized the recent past, it has become a necessity that any property financed through commercial lending institutions should be appraised. Needless to mention, your appraisal report will only be accepted when you work with a registered St. Cloud Appraiser.
Basically, the lender is trying to establish that the property is worth the amount of money you wish to borrow, thanks to high liquidity risk in property assets and long-term home loans. The lender is further ensuring that should you default on paying back the loan, the market value of the property will be sufficient enough to sell and recover their investment.
If you are a first time homebuyer, it might be difficult to understand the ins and outs of property appraisal. The process of acquiring a loan on itself is often a tough and daunting one, always leaving many people confused on what to do. By working with a St. Cloud Appraiser recognized by the leading Appraisal body in the region, Gray Appraisal Services, you can rest assured of the most accurate appraisal report. Remember that this is the report which will be used to underwrite the mortgage in question.
The following are some of the most common approaches your St. Cloud Appraiser is likely to use when conducting an appraisal.
Sales Comparison – this is the most common form of property appraisal used today. It also happens to the simplest of all methods. It is whereby the property in question is compared to comparable properties that have been sold in the recent past in the region. The estimate can then be adjusted to come up with an accurate figure when the difference between similar properties in the region and depreciation are factored in.
Cost Comparison – It is an approach your St. Cloud Appraiser will use to appraise a unique property in an area where there are very few, if any, properties for comparison. This is where the appraiser assumes there will be an identical structure that will be built in the area and estimates the total cost of building the new structure. Since the costs will be based on the existing market prices i.e. labor and material costs at the time of appraisal, the actual value of the property in question will be established once depreciation expenses are deducted.
Income Approach – this is often recommended by experts when coming up with a report of an income-generating property. Your St. Cloud appraiser simply collects data of the monthly rent of the property in question and compiles an accurate estimate of the property value based on a set of assumptions. Comparable properties in the region will be used to determine capitalization rate, rental growth rate, depreciation rate and a million and one other expenses related to the purchase and sale of an income generating property.