A Description of the Appraisal Process
Buying a home can be the largest investment some may ever encounter. It doesn't matter if a main residence, a seasonal vacation property or a rental fixer upper, purchasing real property is a detailed transaction that requires multiple parties to make it all happen.
The majority of the people involved are very familiar. The most familiar person in the transaction is the real estate agent. Then, the mortgage company provides the financial capital needed to fund the transaction. The title company ensures that all aspects of the sale are completed and that a clear title passes from the seller to the purchaser.
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 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 Sax & Associates, Inc. will ensure, you as an interested party, are informed.
Appraisals start with the property inspection
To ascertain an accurate status of the property, it's our duty to first complete a thorough inspection. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they really exist and are in the condition a typical buyer would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is correct and illustrating the layout of the property. Most importantly, the appraiser identifies any obvious features - 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: sales comparison and, in the case of a rental property, an income approach.
This is where the appraiser gathers information on local construction costs, the cost of labor and other elements to ascertain how much it would cost to build a property nearly identical to the one being appraised. This value commonly sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.
Analyzing Comparable Sales
Appraisers get to know the subdivisions in which they work. They thoroughly understand the value of specific features to the homeowners of that area. Then, the appraiser researches recent transactions in the neighborhood and finds properties which are 'comparable' to the subject at hand. 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.
A valid estimate of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. When it comes to knowing the true worth of features of homes in Sherwood and Washington, Sax & Associates, Inc. is your local authority. This approach to value is usually awarded the most weight when an appraisal is for a real estate exchange.
Valuation Using the Income Approach
A third method of valuing approach to value is sometimes employed when an area has a measurable number of renter occupied properties. In this case, the amount of revenue the property yields is factored in with income produced by comparable properties to determine the current value.
Putting It All Together
Examining the data from all approaches, the appraiser is then ready to put down an estimated market value for the subject property. The estimate of value on the appraisal report is not always the final sales price even though it is likely the best indication of what a property is worth. 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 typically used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. Here's what it all boils down to, an appraiser from Sax & Associates, Inc. will help you get the most accurate property value, so you can make profitable real estate decisions.