Making Sense of the Appraisal Process
Acquiring a house is the biggest financial decision some of us might ever make. Whether it's a main residence, a second vacation home or one of many rentals, the purchase of real property is a complex transaction that requires multiple parties to see it through.
You're probably familiar with the parties taking part in the transaction. The real estate agent is the most recognizable person in the exchange. Then, the mortgage company provides the money required to fund the transaction. And ensuring all requirements of the sale are completed and that the title is clear to transfer from the seller to the buyer is the title company.
So, what party is responsible for making sure the value of the property is consistent with 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 licensed, certified, professional appraiser from Allen Appraisal Service will ensure, you as an interested party, are informed.
Inspecting the subject property
Our first duty at Allen Appraisal Service is to inspect the property to ascertain its true status. We must physically view features, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they really are there and are in the condition a typical buyer would expect them to be. To make sure the stated square footage is accurate and convey the layout of the property, the inspection often entails creating a sketch of the floorplan. Most importantly, we identify any obvious amenities - or defects - that would have an impact on the value of the house.
Next, after the inspection, we use two or three approaches to determining the value of the property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.
This is where we use information on local building costs, the cost of labor and other elements to derive how much it would cost to replace the property being appraised. This estimate commonly sets the maximum on what a property would sell for. It's also the least used method.
Analyzing Comparable Sales
Appraisers become very familiar with the subdivisions in which they appraise. They innately understand the value of certain features to the people of that area. Then, the appraiser researches recent sales in the area and finds properties which are 'comparable' to the home in question. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, we adjust the comparable properties so that they more accurately match the features of subject property.
In the end, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At Allen Appraisal Service, we are an authority in knowing the worth of real estate features in Washington and Washington County neighborhoods. This approach to value is most often awarded the most weight when an appraisal is for a real estate exchange.
Valuation Using the Income Approach
A third way of valuing approach to value is sometimes used when a neighborhood has a measurable number of rental properties. In this case, the amount of income the property produces is factored in with income produced by similar properties to derive the current value.
Combining information from all applicable approaches, the appraiser is then ready to document an estimated market value for the property at hand. It is important to note that while this amount is probably the most accurate indication of what a house is worth, it may not be the price at which the property closes. It's not uncommon for prices to 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 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 accurate property value, so you can make profitable real estate decisions.