Home Appraisals: A Primer
Acquiring real estate can be the most important investment most will ever encounter. It doesn't matter if where you raise your family, a seasonal vacation home or an investment, purchasing real property is a detailed transaction that requires multiple parties to pull it all off.
You're probably familiar with the parties taking part in the transaction. The most recognizable face in the transaction is the real estate agent. Next, the mortgage company provides the money needed to fund the transaction. And ensuring all requirements of the exchange are completed and that the title is clear to transfer from the seller to the purchaser is the title company.
So, who's responsible for making sure the value of the real estate is consistent with the purchase price? In comes the appraiser. We provide an unbiased opinion of what a buyer could 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 Accurate Valuation LLC will ensure, you as an interested party, are informed.
Appraisals start with the property inspection
To determine an accurate status of the property, it's our responsibility to first perform a thorough inspection. We must actually see 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 reasonable person would expect them to be. To make sure the stated size of the property has not been misrepresented and describe the layout of the property, the inspection often includes creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious amenities - or defects - that would affect the value of the property.
Back at the office, an appraiser uses two or three approaches to determining the value of real property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.
Here, we gather information on local construction costs, labor rates and other factors to determine how much it would cost to replace the property being appraised. This value often sets the upper limit on what a property would sell for. The cost approach is also the least used method.
Appraisers become very familiar with the communities in which they work. They innately 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 property in question. By assigning a dollar value to certain items such as fireplaces, room layout, appliance upgrades, extra bathrooms or bedrooms, or quality of construction, we add or subtract from each comparable's sales price so that they are more accurately in line with 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. When it comes to putting a value on features of homes in Wellington and Larimer, Accurate Valuation LLC is your local authority. The sales comparison approach to value is typically given the most importance when an appraisal is for a home purchase.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - we may use an additional approach to value. In this scenario, the amount of income the property yields is factored in with income produced by neighboring properties to determine the current value.
Arriving at a Value Conclusion
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 at the bottom of the appraisal report is not always what's being paid for the property even though it is likely the best indication of what a property is worth. Depending on the specific circumstances of the buyer or seller, their level of urgency or a buyer's desire for that exact property, the closing price of a home can always be driven 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 Accurate Valuation LLC will help you discover the most accurate property value, so you can make wise real estate decisions.