What Are the Parts of an Appraisal?
Their home's purchase is the most serious financial decision most of us may ever make. It doesn't matter if where you raise your family, a seasonal vacation home or one of many rentals, purchasing real property is an involved transaction that requires multiple people working in concert to pull it all off.
Practically all the participants are very familiar. The real estate agent is the most familiar face in the exchange. Next, the mortgage company provides the financial capital needed to bankroll the transaction. And the title company sees to it that all areas of the transaction are completed and that the title is clear to pass from the seller to the purchaser.
So, what party is responsible for making sure the value of the property is in line with the amount being paid? In comes the appraiser. We provide an unbiased estimate of what a buyer might 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 Evelyn Donica Appraisals will ensure, you as an interested party, are informed.
Appraisals start with the home inspection
To determine the true status of the property, it's our duty to first conduct a thorough inspection. We must physically see aspects of the property, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they really are present and are in the condition a reasonable person would expect them to be. To ensure the stated size of the property has not been misrepresented and describe the layout of the house, the inspection often includes creating a sketch of the floorplan. Most importantly, we identify any obvious features - or defects - that would affect the value of the property.
Following the inspection, an appraiser uses two or three approaches to determining the value of the property: paired sales analysis and, in the case of a rental property, an income approach.
Here, we use information on local construction costs, the cost of labor and other elements to ascertain how much it would cost to construct a property nearly identical to the one being appraised. This estimate often sets the maximum on what a property would sell for. It's also the least used predictor of value.
Paired Sales Analysis
Appraisers are intimately familiar with the subdivisions in which they appraise. They thoroughly understand the value of specific features to the homeowners of that area. Then, the appraiser looks up recent sales in close proximity to the subject and finds properties which are 'comparable' to the home being appraised. By assigning a dollar value to certain items such as upgraded appliances, additional bathrooms, additional living area, quality of construction, lot size, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject property.
Once all necessary adjustments have been made, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At Evelyn Donica Appraisals, we are an authority in knowing the worth of real estate features in Hatfield and Polk County neighborhoods. The sales comparison approach to value is usually given the most weight when an appraisal is for a real estate sale.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - the appraiser may use an additional method of valuing a property. In this scenario, the amount of revenue the real estate yields is taken into consideration along with income produced by nearby properties to give an indicator of the current value.
The Bottom Line
Combining information from all approaches, the appraiser is then ready to document an estimated market value for the subject property. The estimate of value on the appraisal report is not always what's being paid for the property even though it is likely the best indication of a property's valueThere 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 typically used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. At the end of the day, an appraiser from Evelyn Donica Appraisals will guarantee you get the most fair and balanced property value, so you can make wise real estate decisions.