Decoding the Appraisal Process
Their home's purchase is the most serious financial decision many of us may ever make. Whether it's where you raise your family, an additional vacation home or one of many rentals, purchasing real property is a complex transaction that requires multiple people working in concert to pull it all off.
Practically all the parties participating are quite familiar. The real estate agent is the most recognizable person in the transaction. Next, the bank provides the financial capital needed to finance the transaction. And ensuring all aspects of the sale are completed and that a clear title passes from the seller to the buyer is the title company.
So, what party is responsible for making sure the real estate is worth the amount being paid? This is where the appraiser comes in. We provide an unbiased estimate 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.
Inspecting the subject property
Our first responsibility 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 really exist and are in the shape a reasonable buyer would expect them to be. To make sure the stated size of the property has not been misrepresented and document the layout of the property, the inspection often requires creating a sketch of the floorplan. Most importantly, we identify any obvious amenities - or defects - that would have an impact on the value of the house.
Once the site has been inspected, an appraiser uses 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, the appraiser pulls information on local construction costs, labor rates and other elements to determine how much it would cost to construct a property nearly identical to the one being appraised. This estimate usually sets the upper limit on what a property would sell for. It's also the least used method.
Appraisers can tell you a lot about the neighborhoods in which they work. They thoroughly understand the value of specific features to the residents of that area. Then, the appraiser looks up recent sales in close proximity to the subject and finds properties which are 'comparable' to the subject at hand. Using knowledge of the value of certain items such as square footage, additional 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 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. At Graham Appraisal, we are experts when it comes to knowing the value of particular items in Glasgow and Barren County neighborhoods. The sales comparison approach to value is most often awarded the most importance when an appraisal is for a home exchange.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - we may use an additional method of valuing real estate. In this scenario, the amount of revenue the property produces is factored in with income produced by comparable properties to derive the current value.
The Bottom Line
Combining information from all applicable approaches, the appraiser is then ready to put down an estimated market value for the property at hand. Note: While the appraised value is probably the most reliable indication of what a house is worth, it probably will not be the final sales price. 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.But the appraised value is typically employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. It all comes down to this, an appraiser from Graham Appraisal will help you get the most fair and balanced property value, so you can make wise real estate decisions.