Decoding the Appraisal Process
Buying a house can be the most significant financial decision some people could ever make. It doesn't matter if a primary residence, a seasonal vacation home or an investment, the purchase of real property is a complex financial transaction that requires multiple parties to pull it all off.
It's likely you are familiar with the parties taking part in the transaction. The most recognizable face in the exchange is the real estate agent. Then, the lender provides the money needed to bankroll the exchange. And the title company sees to it that all areas of the sale are completed and that a clear title transfers from the seller to the buyer.
So, what party makes sure the property is worth the purchase price? This is where the appraiser comes in. We provide an unbiased opinion of what a buyer might 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 Graham Appraisal will ensure, you as an interested party, are informed.
The inspection is where an appraisal starts
Our first task at Graham Appraisal is to inspect the property to determine its true status. We must physically see features, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they indeed exist and are in the shape a typical person would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is proper and illustrating the layout of the property. Most importantly, the appraiser looks for any obvious features - or defects - that would have an impact on the value of the house.
Following the inspection, we use 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, the cost of labor and other elements to figure out how much it would cost to construct a property comparable to the one being appraised. This figure commonly sets the upper limit on what a property would sell for. It's also the least used method.
Appraisers become very familiar with the communities in which they appraise. They thoroughly understand the value of particular features to the people of that area. Then, the appraiser looks up recent sales in close proximity to the subject and finds properties which are 'comparable' to the home at hand. By assigning a dollar value to certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or extra 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.
After all differences have been accounted for, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At Graham Appraisal, we are an authority when it comes to knowing the value of real estate features in Glasgow and Barren County neighborhoods. This approach to value is usually given the most consideration when an appraisal is for a real estate purchase.
Valuation Using the Income Approach
A third way of valuing approach to value is sometimes applied when an area has a measurable number of renter occupied properties. In this case, the amount of income the real estate yields is factored in with other rents in the area for comparable properties to give an indicator of the current value.
Putting It All Together
Analyzing the data from all applicable approaches, the appraiser is then ready to document an estimated market value for the property at hand. The estimate of value on the appraisal report is not always the final sales price even though it is likely the best indication of a property's valueDepending 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 often employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. Here's what it all boils down to, an appraiser from Graham Appraisal will guarantee you attain the most accurate property value, so you can make wise real estate decisions.