A home purchase can be the most serious financial decision most will ever make. It doesn't matter if a main residence, a second vacation home or an investment, purchasing real property is a complex transaction that requires multiple parties to see it through.
It's likely you are familiar with the parties having a role in the transaction. The real estate agent is the most recognizable person in the exchange. Next, the mortgage company provides the money needed to bankroll the exchange. And ensuring all details of the transaction are completed and that a clear title transfers to the buyer from the seller is the title company.
So, who's responsible for making sure the value of the property is consistent with the purchase price? This is where the appraiser comes in. We provide an unbiased opinion 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 Evelyn Donica Appraisals will ensure, you as an interested party, are informed.
The inspection is where an appraisal starts
To ascertain an accurate status of the property, it's our responsibility to first conduct a thorough inspection. We must actually see features, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really are there and are in the shape a typical buyer would expect them to be. To ensure the stated square footage is accurate and document the layout of the home, the inspection often includes creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious features - or defects - that would have an impact on the value of the house.
Back at the office, we use 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.
This is where we analyze information on local construction costs, labor rates and other factors to determine how much it would cost to replace the property being appraised. This figure commonly sets the upper limit on what a property would sell for. It's also the least used method.
Appraisers get to know the subdivisions in which they appraise. They innately understand the value of particular features to the homeowners of that area. Then, the appraiser looks up recent sales in the area and finds properties which are 'comparable' to the subject 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 adjust the comparable properties so that they more accurately portray the features of subject.
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 Evelyn Donica Appraisals, we are an authority in knowing the value of real estate features in Hatfield and Polk County neighborhoods. The sales comparison approach to value is typically given the most weight when an appraisal is for a home exchange.
Valuation Using the Income Approach
A third method of valuing real estate is sometimes employed when a neighborhood has a measurable number of renter occupied properties. In this case, the amount of income the real estate yields is factored in with income produced by neighboring properties to derive the current value.
The Bottom Line
Combining information 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 necessarily what's being paid for the property even though it is likely the best indication of what a property is worth. There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust the final price up or down. But the appraised value is typically employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. It all comes down to this, an appraiser from Evelyn Donica Appraisals will guarantee you get the most fair and balanced property value, so you can make profitable real estate decisions.