Decoding the Appraisal Process
A home purchase is the most serious investment many of us may ever encounter. Whether it's a primary residence, a second vacation home or an investment, purchasing real property is a complex transaction that requires multiple people working in concert to see it through.
Practically all the participants are quite familiar. The real estate agent is the most familiar person in the transaction. Next, the bank provides the money required to finance the exchange. And ensuring all aspects of the sale are completed and that the title is clear to pass from the seller to the purchaser is the title company.
So, what party makes sure the value of the property is consistent with the purchase price? This is where you meet the appraiser. 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 licensed, certified, professional appraiser from Allen Appraisal Service will ensure, you as an interested party, are informed.
Appraisals start with the property inspection
To determine the true status of the property, it's our duty to first conduct a thorough inspection. We must see features hands on, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly are there and are in the shape a reasonable person would expect them to be. To make sure the stated size of the property is accurate and convey the layout of the home, the inspection often entails creating a sketch of the floorplan. Most importantly, we look for any obvious features - or defects - that would affect the value of the house.
Next, 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.
Here, the appraiser analyzes 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 estimate often sets the upper limit on what a property would sell for. The cost approach is also the least used predictor of value.
Paired Sales Analysis
Appraisers get to know the communities in which they work. They innately understand the value of particular features to the people of that area. Then, the appraiser looks up recent sales in the vicinity and finds properties which are 'comparable' to the home in question. By assigning a dollar value to certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or additional storage space, we adjust the comparable properties so that they more accurately match the features of subject.
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 putting a value on features of homes in St. George and Washington, Allen Appraisal Service is your local authority. This approach to value is commonly given the most importance when an appraisal is for a home purchase.
Valuation Using the Income Approach
A third way of valuing real estate is sometimes applied when a neighborhood has a reasonable number of rental properties. In this scenario, the amount of revenue the real estate produces is taken into consideration along with income produced by comparable properties to give an indicator of the current value.
Coming Up With The Final Value
Analyzing the data from all 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 always 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.But the appraised value is often used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. The bottom line is, an appraiser from Allen Appraisal Service will help you get the most fair and balanced property value, so you can make the most informed real estate decisions.