Home Appraisals: A Primer
Their home's purchase can be the most serious financial decision some people might ever consider. It doesn't matter if where you raise your family, a seasonal vacation home or an investment, the purchase of real property is an involved financial transaction that requires multiple people working in concert to pull it all off.
The majority of the parties involved are quite familiar. The most recognizable entity in the exchange is the real estate agent. Then, the lender provides the money needed to fund the exchange. And ensuring all details of the sale are completed and that the title is clear to pass from the seller to the buyer is the title company.
So, who's responsible for making sure the property is worth the purchase price? This is where you meet the appraiser. We provide an unbiased opinion of what a buyer might expect to pay — or a seller receive — for a property, 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.
The inspection is where an appraisal begins
To determine an accurate status of the property, it's our responsibility to first perform a thorough inspection. We must actually see features, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly exist and are in the condition a typical buyer would expect them to be. To make sure the stated size of the property is accurate and describe the layout of the property, the inspection often entails creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious features - or defects - that would affect the value of the property.
Once the site has been inspected, we use two or three approaches to determining the value of real property: sales comparison and, in the case of a rental property, an income approach.
Here, we gather 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 value commonly sets the maximum on what a property would sell for. It's also the least used method.
Appraisers become very familiar with the neighborhoods in which they work. They innately understand the value of particular features to the people of that area. Then, the appraiser looks up recent transactions in the neighborhood and finds properties which are 'comparable' to the home at hand. By assigning a dollar value to certain items such as square footage, additional bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we add or subtract from each comparable's sales price so that they more accurately match the features of subject property.
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. At Evelyn Donica Appraisals, we are an authority in knowing the worth of real estate features in Hatfield and Polk County neighborhoods. This approach to value is most often awarded the most consideration when an appraisal is for a home purchase.
Valuation Using the Income Approach
A third way of valuing approach to value is sometimes applied when an area has a reasonable number of rental properties. In this situation, the amount of revenue the property produces is factored in with other rents in the area for comparable properties to derive the current value.
Putting It All Together
Examining the data from all approaches, the appraiser is then ready to document an estimated market value for the property at hand. Note: While the appraised value is probably the most reliable indication of what a property is worth, it may not be the price at which the property closes. There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust an offer or listing price 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 they could recover in case they had to sell the property again. Here's what it all boils down to, an appraiser from Evelyn Donica Appraisals will help you get the most accurate property value, so you can make profitable real estate decisions.