A Description of the Appraisal ProcessOne's home purchase is the biggest transaction some of us may ever make. Whether it's a primary residence, a seasonal vacation property or an investment, the purchase of real property is an involved transaction that requires multiple parties to pull it all off.
Most people are familiar with the parties having a role in the transaction. The most known person in the exchange is the real estate agent. Next, the bank provides the money required to finance the deal. Ensuring all aspects of the sale are completed and that a clear title passes to the buyer from the seller is the title company.
So who's responsible for making sure 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 professional Pennsylvania licensed appraiser from Applied Appraisals will ensure you as an interested party are informed.
The inspection is where an appraisal startsOur first duty at Applied Appraisals is to inspect the property to determine its true status. We must actually view features, such as the number of bedrooms and bathrooms, the location, living areas, etc., to ensure they really are there and are in the shape a typical buyer would expect them to be. The inspection often includes a sketch of the floor plan, ensuring the square footage is correct and conveying the layout of the property. Most importantly, we identify any obvious amenities - or defects - that would affect the value of the house.
Once the site has been inspected, we use two or three approaches when determining the value of real property: paired sales analysis and, in the case of a rental property, an income approach.
Replacement CostHere, we pull information on local building costs, labor rates and other factors to ascertain how much it would cost to build a property similar to the one being appraised. This value usually sets the maximum on what a property would sell for. The cost approach is also the least used method.
Analyzing Comparable SalesAppraisers are intimately familiar with the neighborhoods in which they work. We innately understand the value of certain features to the residents of that area. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are 'comparable' to the subject being appraised. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, we adjust the comparable properties so that they are more accurately in line with the features of subject property.
Valuation Using the Income ApproachIn the case of income producing properties - rental houses for example - we may use an additional method of valuing a house. In this situation, the amount of income the real estate generates is taken into consideration along with income produced by neighboring properties to derive the current value.
Coming Up With the Final ValueCombining information from all approaches, the appraiser is then ready to document an estimated market value for the subject property. The estimate of value at the bottom of the appraisal report is not always the final sales price even though it is likely the best indication of a property's market value Depending on the specific 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 typically employed as a guideline for lenders who don't want to loan a buyer more money than the property would likely sell for in an open marketplace. At the end of the day: An appraiser from Applied Appraisals will guarantee you get the most fair and balanced property value, so you can make profitable real estate decisions.