Home Appraisals: A Primer
A home purchase can be the biggest investment many of us could ever encounter. It doesn't matter if a primary residence, a second vacation property or a rental fixer upper, purchasing real property is a detailed transaction that requires multiple parties to see it through.
The majority of the parties involved are quite familiar. The real estate agent is the most familiar entity in the transaction. Next, the mortgage company provides the money required to finance the deal. And ensuring all areas of the sale are completed and that the title is clear to transfer to the buyer from the seller is the title company.
So, who's responsible for making sure the real estate is worth the amount being paid? In comes the appraiser. 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 Angelo Appraisal Service, inc. will ensure, you as an interested party, are informed.
Inspecting the subject property
To ascertain the true status of the property, it's our responsibility to first complete a thorough inspection. We must physically view aspects of the property, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they indeed are present and are in the shape a typical person would expect them to be. To ensure the stated square footage is accurate and describe the layout of the house, the inspection often requires 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, the appraiser pulls information on local building costs, the cost of labor and other elements to calculate how much it would cost to replace the property being appraised. This estimate often sets the maximum on what a property would sell for. It's also the least used method.
Appraisers are intimately familiar with the neighborhoods in which they work. They thoroughly understand the value of certain features to the residents of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the home in question. Using knowledge of the value of certain items such as upgraded appliances, extra bathrooms, additional living area, quality of construction, lot size, we adjust the comparable properties so that they are more accurately in line with the features of subject property.
An opinion of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. At Angelo Appraisal Service, inc., we are an authority when it comes to knowing the value of particular items in Edmond and Oklahoma County neighborhoods. The sales comparison approach to value is commonly given the most weight when an appraisal is for a home sale.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - we may use a third method of valuing a property. In this scenario, the amount of revenue the real estate yields is factored in with income produced by similar properties to determine the current value.
Combining information from all applicable 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 the final sales price even though it is likely the best indication of what a property is worth. There are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust the final price up or down. Regardless, the appraised value is often used as a guideline for lenders who don't want to loan a buyer more money than they could get back in the event they had to put the property on the market again. Here's what it all boils down to, an appraiser from Angelo Appraisal Service, inc. will help you discover the most fair and balanced property value, so you can make the most informed real estate decisions.