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Understanding Appraisals

Acquiring a home is the most serious transaction many might ever encounter. It doesn't matter if where you raise your family, a seasonal vacation home or an investment, the purchase of real property is a complex transaction that requires multiple parties to make it all happen.

Practically all the parties involved are very familiar. The real estate agent is the most recognizable person in the exchange. Next, the mortgage company provides the money needed to fund the deal. And ensuring all requirements of the exchange are completed and that a clear title transfers from the seller to the purchaser is the title company.

To learn more about appraising, click here to see a short video or call us today to talk about your specific property.

So, who makes sure the real estate is worth the amount being paid? This is where you meet 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 Barnes Appraisal Company will ensure, you as an interested party, are informed.

The inspection is where an appraisal begins

To determine an accurate status of the property, it's our duty to first complete a thorough inspection. We must actually see features, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly are present and are in the shape a reasonable person would expect them to be. To make sure the stated size of the property has not been misrepresented and convey the layout of the home, 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, an appraiser uses two or three approaches to determining the value of the property: paired sales analysis and, in the case of a rental property, an income approach.

Replacement Cost

Here, we use information on local building costs, the cost of labor and other factors to figure out how much it would cost to replace the property being appraised. This value usually sets the upper limit on what a property would sell for. The cost approach is also the least used method.

Analyzing Comparable Sales

Appraisers become very familiar with the communities in which they work. They innately understand the value of certain features to the people of that area. Then, the appraiser researches recent transactions in the vicinity and finds properties which are 'comparable' to the real estate being appraised. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject property.

  • Say, for example, the comparable 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 home.
  • 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.

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. When it comes to associating a value with features of homes in Lawton and Comanche, Barnes Appraisal Company is second to none. The sales comparison 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 generates is taken into consideration along with other rents in the area for comparable properties to determine the current value.

Reconciliation

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 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.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 Barnes Appraisal Company will guarantee you get the most accurate property value, so you can make profitable real estate decisions.