A Description of the Appraisal ProcessPurchasing a house can be the largest financial decision some might ever make. Whether it's where you raise your family, a second vacation home or an investment, purchasing real property is a complex financial transaction that requires multiple parties to make it all happen. The majority of the parties involved are quite familiar. The most known entity in the exchange is the real estate agent. Then, the lender provides the financial capital needed to fund the transaction. And ensuring all aspects of the exchange are completed and that the title is clear to pass from the seller to the buyer is the title company. So, what party makes sure the property is worth the purchase price? In comes the appraiser. We provide an unbiased estimate of what a buyer might expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Donica Appraisals will ensure, you as an interested party, are informed. Appraisals start with the property inspectionOur first responsibility at Donica Appraisals is to inspect the property to determine its true status. We must see features first hand, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly are present and are in the condition a typical buyer would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is accurate and conveying the layout of the property. Most importantly, the appraiser identifies any obvious amenities - or defects - that would affect the value of the property. Following the inspection, we use two or three approaches to determining the value of real property: paired sales analysis and, in the case of a rental property, an income approach. Replacement CostThis is where the appraiser uses information on local building costs, labor rates and other elements to derive 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. It's also the least used method. Sales ComparisonAppraisers get to know the subdivisions in which they work. They innately understand the value of specific features to the people of that area. Then, the appraiser researches recent transactions in close proximity to the subject and finds properties which are 'comparable' to the home at hand. Using knowledge of the value of certain items such as square footage, extra bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we add or subtract from each comparable's sales price so that they more accurately match the features of subject property.
In the end, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At Donica Appraisals, we are an authority in knowing the value of particular items in Hatfield and Polk County neighborhoods. The sales comparison approach to value is typically given the most weight when an appraisal is for a home exchange. Valuation Using the Income ApproachA third method of valuing approach to value is sometimes used when an area has a measurable number of renter occupied properties. In this situation, the amount of income the property yields is factored in with other rents in the area for comparable properties to determine the current value. Putting It All TogetherExamining the data from all applicable 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 strongest indication of what a property is worth, it may not be the final sales price. There are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust an offer or listing price up or down. Regardless, the appraised value is often used as a guideline for lenders who don't want to loan a buyer more money than they could recover in case they had to sell the property again. It all comes down to this, an appraiser from Donica Appraisals will help you attain the most fair and balanced property value, so you can make the most informed real estate decisions. |