Making Sense of the Appraisal Process
Getting a home is the biggest financial decision many will ever encounter. Whether it's a primary residence, a second vacation property or one of many rentals, purchasing real property is a detailed financial transaction that requires multiple parties to see it through.
Most people are familiar with the parties taking part in the transaction. The most recognizable person in the transaction is the real estate agent. Then, the lender provides the money needed to finance the exchange. And ensuring all requirements of the sale are completed and that the title is clear to transfer from the seller to the buyer is the title company.
So, what party makes sure the value of the property is consistent with the amount being paid? This is where you meet 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 Graham Appraisal will ensure, you as an interested party, are informed.
Inspecting the subject property
Our first task at Graham Appraisal is to inspect the property to determine its true status. We must actually see aspects of the property, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they indeed are there and are in the condition a typical 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 home, the inspection often includes creating a sketch of the floorplan. Most importantly, we identify any obvious amenities - or defects - that would affect the value of the property.
Next, after the inspection, 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 gathers information on local construction costs, the cost of labor and other elements to derive 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. It's also the least used method.
Analyzing Comparable Sales
Appraisers become very familiar with the neighborhoods in which they work. They thoroughly understand the value of specific features to the homeowners of that area. Then, the appraiser looks up recent sales in the vicinity and finds properties which are 'comparable' to the home being appraised. Using knowledge of the value of certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or additional storage space, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject property.
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 associating a value with features of homes in Glasgow and Barren, Graham Appraisal can't be beat. The sales comparison approach to value is usually given the most importance when an appraisal is for a real estate exchange.
Valuation Using the Income Approach
A third method of valuing real estate is sometimes employed when an area has a reasonable number of rental properties. In this case, the amount of revenue the real estate generates is factored in with income produced by neighboring properties to derive the current value.
Arriving at a Value Conclusion
Analyzing the data from all applicable approaches, the appraiser is then ready to put down an estimated market value for the property in question. It is important to note that while the appraised value is probably the most accurate indication of what a house is worth, it may not be the final sales price. Depending on the individual situations 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 often employed 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 Graham Appraisal will help you get the most fair and balanced property value, so you can make wise real estate decisions.