"Values You Can Depend On"

 

A home purchase is probably the largest investment most people will ever make. Whether it's a primary residence, a vacation home or vacant land, the purchase of real estate can be a complex financial transaction. The appraisal is just one of the many aspects of the sale or refinance of real estate. However, it is a very important one. An appraisal is an unbiased estimate of what a buyer might expect to pay or what a seller might expect to receive for a parcel of real estate out in the open market. To be an informed party, most people turn to a licensed, certified, professional appraiser to provide them with the most accurate estimate of the true market value of their property. The appraisal helps to make sure the buyer is not paying to much for a property, the seller is getting fair market value and the lender is not lending more money on a property than the property is worth. The appraisal can help protect everyone involved with the transaction.

 

The first step of the appraisal is the inspection. An appraiser's duty is to inspect the property being appraised to evaluate the true status of that property. The appraiser looks for features such as the number of bedrooms, bathrooms and fireplaces. The appraiser also takes note of any upgrades such as granite countertops and wood floors. Location, view, quality of construction, condition, design and appeal of the subject play a huge role in its overall marketability and value. Photographs of the subject property are taken, usually exterior and interior. The home is measured to estimate the gross living area. A sketch of the subject is derived from this and is provided in the appraisal with a room placement or layout. Once the subject has been inspected, the appraiser may utilize one or a combination of three approaches to value.

 

The cost approach to value is base off of replacement cost. Usually, the appraiser utilizes local building cost, experience in the market and estimates of any deferred maintenance or deterioration to determine what it would cost to replace the subject property. This approach to value can be the most complicated depending on the age and condition of the subject property

 

Appraisers get to know the neighborhoods in which they work. They understand the value of certain features to the residents of that area. They know the traffic patterns, the school zones, the busy highways; and they use this information to determine which attributes of a property will make a difference in the value. Then, the appraiser researches recent sales in the vicinity and finds properties which are ''comparable'' to the subject being appraised. The sale prices of these properties are used as a basis to begin the sales comparison approach. Using knowledge of the value of certain items such as square footage, extra bathrooms, hardwood floors, fireplaces or view, the appraiser adjusts the comparable properties to more accurately portray the subject property. For example, if the comparable property has a fireplace and the subject does not, the appraiser may deduct the value of a fireplace from the sales price of the comparable home. If the subject property has an extra half-bathroom and the comparable does not, the appraiser might add a certain amount to the comparable property.

 

When dealing with a income producing property, such as a duplex or rental home, the appraiser will most likely use the income approach in the appraisal. The appraiser will research what similar properties are renting for in the surrounding market area, compare these properties to the subject and derive a value from these findings. In the reconciliation section of the report, the appraiser weighs in all the approaches that were utilized in the appraisal report to calculate the estimated value of the subject property.

 

It is important to note that while this amount is probably the best indication of what a property is worth, it may not be the final sales price. There are always unforeseen factors such as seller motivation; urgency or ''bidding wars'' that may affect the final price. But, the appraised value is often used as a guideline for lenders who don't want to loan a buyer more money that the property is actually worth, a buyer that does not want to pay too much or a seller that is trying to get at least the fair market value. The appraiser will help you estimate the most accurate property value, so you can make a sound financial decision.