Decoding the Appraisal Process

A home purchase can be the biggest transaction many might ever encounter. It doesn't matter if a primary residence, an additional vacation property or an investment, the purchase of real property is a complex financial transaction that requires multiple people working in concert to see it through.

Most people are familiar with the parties having a role in the transaction. The most known person in the transaction is the real estate agent. Next, the bank provides the money required to bankroll the deal. The title company ensures that all areas of the sale are completed and that the title is clear to pass from the seller to the buyer.

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So, what party makes sure the property is worth the amount being paid? This is where the appraiser comes in. We provide an unbiased estimate of what a buyer could 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 United Appraisal Group will ensure, you as an interested party, are informed.

Appraisals begin with the property inspection

Our first duty at United Appraisal Group 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 really exist and are in the shape a typical person would expect them to be. To ensure the stated size of the property is accurate and describe the layout of the house, the inspection often entails creating a sketch of the floorplan. Most importantly, we look for any obvious amenities - or defects - that would affect the value of the house.

Back at the office, we use two or three approaches to determining the value of the property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.

Cost Approach

Here, we analyze information on local building costs, the cost of labor and other factors to ascertain how much it would cost to replace the property being appraised. This estimate commonly sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.

Sales Comparison

Appraisers get to know the subdivisions in which they work. They thoroughly understand the value of certain features to the residents of that area. Then, the appraiser looks up recent transactions in the vicinity and finds properties which are 'comparable' to the property being appraised. By assigning a dollar value to certain items such as square footage, extra bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we adjust the comparable properties so that they more accurately match the features of subject property.

  • Say, for example, the comparable property has a storm shelter and the subject doesn't, the appraiser may deduct the value of a storm shelter from the sales price of the comparable.
  • However, in the case where the subject has something such as an extra half bath that a comparable doesn't have, the appraiser might add the value of that bath to the comparable 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. When it comes to putting a value on features of homes in Defiance and Franklin, United Appraisal Group is your local authority. This approach to value is most often given the most importance when an appraisal is for a real estate purchase.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - the appraiser may use a third method of valuing a property. In this case, the amount of revenue the property yields is factored in with income produced by similar properties to determine the current value.

Reconciliation

Analyzing the data from all applicable approaches, the appraiser is then ready to state an estimated market value for the property in question. The estimate of value at the bottom of the appraisal report is not always what's being paid for the property even though it is likely the best indication of a property's valueThere are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust an offer or listing price 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 they could recover in case they had to sell the property again. Here's what it all boils down to, an appraiser from United Appraisal Group will guarantee you get the most fair and balanced property value, so you can make wise real estate decisions.