Home Appraisals: A Primer
A home purchase can be the most serious investment some of us may ever encounter. Whether it's a primary residence, a seasonal vacation property or one of many rentals, purchasing real property is an involved financial transaction that requires multiple parties to see it through.
You're likely to be familiar with the parties taking part in the transaction. The real estate agent is the most known person in the transaction. Then, the lender provides the money required to bankroll the exchange. And the title company ensures that all aspects of the exchange are completed and that the title is clear to transfer to the buyer from the seller.
So, what party is responsible for making sure the property is worth the amount being paid? In comes the appraiser. We provide an unbiased estimate 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 Barnes Appraisal Company will ensure, you as an interested party, are informed.
Inspecting the subject property
Our first responsibility at Barnes Appraisal Company 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 truly are there and are in the shape a typical person would expect them to be. To ensure the stated size of the property is accurate and document the layout of the home, the inspection often includes creating a sketch of the floorplan. Most importantly, we look for any obvious features - or defects - that would have an impact on the value of the property.
Back at the office, we use 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.
This is where we analyze information on local building costs, the cost of labor and other elements to figure out how much it would cost to replace the property being appraised. This estimate commonly sets the upper limit on what a property would sell for. It's also the least used predictor of value.
Appraisers are intimately familiar with the neighborhoods in which they appraise. They innately understand the value of particular features to the homeowners of that area. Then, the appraiser researches recent sales in the vicinity and finds properties which are 'comparable' to the real estate in question. By assigning a dollar value to certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or additional storage space, we add or subtract from each comparable's sales price so that they are more accurately in line with 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 Barnes Appraisal Company, we are experts in knowing the worth of particular items in Lawton and Comanche County neighborhoods. This approach to value is commonly given 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 a third approach to value. In this case, the amount of revenue the real estate yields is taken into consideration along with other rents in the area for comparable properties to derive the current value.
Putting It All Together
Examining the data from all applicable approaches, the appraiser is then ready to put down an estimated market value for the property in question. The estimate of value at the bottom of the appraisal report is not necessarily what's being paid for the property even though it is likely the best indication of a property's valueDepending on the specific circumstances 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 used 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. Here's what it all boils down to, an appraiser from Barnes Appraisal Company will guarantee you get the most accurate property value, so you can make wise real estate decisions.