Making Sense of the Appraisal Process
Getting a home is the largest transaction some of us will ever consider. It doesn't matter if where you raise your family, an additional vacation home or a rental fixer upper, the purchase of real property is a complex financial transaction that requires multiple parties to pull it all off.
Most of the parties involved are very familiar. The most known face in the transaction is the real estate agent. Next, the lender provides the financial capital necessary to finance the transaction. And ensuring all details of the transaction are completed and that a clear title passes from the seller to the buyer is the title company.
So, who's responsible for making sure the value of the real estate is in line with the amount being paid? This is where the appraiser comes in. 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 licensed, certified, professional appraiser from Elite Appraisal Services will ensure, you as an interested party, are informed.
The inspection is where an appraisal starts
Our first responsibility at Elite Appraisal Services 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, and so on, to ensure they really are there and are in the shape a typical person would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is proper and conveying the layout of the property. Most importantly, the appraiser identifies any obvious features - or defects - that would affect the value of the property.
Back at the office, we use two or three approaches to determining the value of the property: sales comparison and, in the case of a rental property, an income approach.
This is where we analyze information on local building costs, the cost of labor and other elements to derive how much it would cost to build a property comparable to the one being appraised. This value commonly sets the maximum on what a property would sell for. It's also the least used method.
Paired Sales Analysis
Appraisers become very familiar with the communities in which they appraise. They thoroughly understand the value of specific features to the homeowners of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the home being appraised. By assigning a dollar value to certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or extra storage space, we add or subtract from each comparable's sales price so that they more accurately portray the features of subject.
After all differences have been accounted for, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At Elite Appraisal Services, we are an authority in knowing the value of real estate features in Pearland and Brazoria County neighborhoods. This approach to value is most often awarded the most weight when an appraisal is for a home sale.
Valuation Using the Income Approach
A third method of valuing a house is sometimes applied when a neighborhood 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 derive the current value.
The Bottom Line
Combining information from all applicable approaches, the appraiser is then ready to document an estimated market value for the property at hand. The estimate of value on the appraisal report is not necessarily the final sales price even though it is likely the best indication of what a property is worth. There are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust the final price up or down. But the appraised value is often employed as a guideline for lenders who don't want to loan a buyer more money than they could get back in the event they had to sell the property again. The bottom line is, an appraiser from Elite Appraisal Services will guarantee you get the most accurate property value, so you can make profitable real estate decisions.