What Goes Into an Appraisal?
Acquiring real estate is the largest financial decision many might ever make. It doesn't matter if where you raise your family, an additional vacation property or an investment, the purchase of real property is an involved transaction that requires multiple parties to pull it all off.
Most of the participants are very familiar. The most known face in the transaction is the real estate agent. Next, the bank provides the financial capital necessary to fund the transaction. The title company makes sure that all aspects of the sale are completed and that the title is clear to pass to the buyer from the seller.
So, who's responsible for making sure the value of the property is in line with the amount being paid? This is where you meet the appraiser. We provide an unbiased estimate 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 Accurate Valuation LLC will ensure, you as an interested party, are informed.
Inspecting the subject property
To determine an accurate status of the property, it's our responsibility to first complete a thorough inspection. We must physically view features, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed exist and are in the condition a typical buyer would expect them to be. To ensure the stated size of the property has not been misrepresented and convey the layout of the property, the inspection often entails creating a sketch of the floorplan. Most importantly, we look for any obvious features - or defects - that would affect the value of the house.
Once the site has been inspected, an appraiser uses 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 the appraiser uses information on local construction costs, the cost of labor and other factors to calculate how much it would cost to replace the property being appraised. This estimate commonly sets the upper limit on what a property would sell for. It's also the least used predictor of value.
Analyzing Comparable Sales
Appraisers get to know the neighborhoods in which they appraise. They thoroughly understand the value of particular features to the people of that area. Then, the appraiser researches recent sales in the vicinity and finds properties which are 'comparable' to the subject 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 add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject.
An opinion of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. When it comes to knowing the true worth of features of homes in Wellington and Larimer, Accurate Valuation LLC is your local authority. This approach to value is most often given the most consideration when an appraisal is for a real estate 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 revenue the real estate generates is taken into consideration along with other rents in the area for comparable properties to derive the current value.
Coming Up With The Final Value
Combining information from all approaches, the appraiser is then ready to put down an estimated market value for the property at hand. It is important to note that while the appraised value is probably the best indication of what a property is worth, it may not be the final sales price. Prices can always be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. But 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. The bottom line is, an appraiser from Accurate Valuation LLC will guarantee you attain the most fair and balanced property value, so you can make profitable real estate decisions.