What Are the Components of an Appraisal?
Purchasing a house can be the most serious transaction many might ever consider. It doesn't matter if a main residence, an additional vacation home or a rental fixer upper, the purchase of real property is a complex financial transaction that requires multiple parties to make it all happen.
Most of the people involved are very familiar. The most known face in the exchange is the real estate agent. Then, the mortgage company provides the financial capital needed to finance the exchange. And ensuring all areas of the sale are completed and that a clear title passes from the seller to the buyer is the title company.
So, what party makes 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 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.
Appraisals start with the inspection
To determine the true status of the property, it's our responsibility to first conduct a thorough inspection. We must see aspects of the property hands on, 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 reasonable buyer would expect them to be. To ensure the stated size of the property has not been misrepresented and describe the layout of the property, the inspection often entails 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 house.
Once the site has been inspected, an appraiser uses two or three approaches to determining the value of the property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.
This is where we pull information on local building costs, the cost of labor and other elements to ascertain how much it would cost to replace the property being appraised. This value commonly sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.
Appraisers are intimately familiar with the communities in which they work. They innately understand the value of particular features to the homeowners of that area. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are 'comparable' to the property being appraised. By assigning a dollar value to certain items such as upgraded appliances, additional bathrooms, additional living area, quality of construction, lot size, we add or subtract from each comparable's sales price so that they more accurately match the features of subject property.
A true estimate of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. At Barnes Appraisal Company, we are experts in knowing the value of particular items in Lawton and Comanche County neighborhoods. The sales comparison approach to value is commonly awarded the most importance when an appraisal is for a real estate purchase.
Valuation Using the Income Approach
A third method of valuing approach to value is sometimes used when a neighborhood has a reasonable number of rental properties. In this case, the amount of revenue the real estate yields is factored in with other rents in the area for comparable properties to derive the current value.
Putting It All Together
Combining information from all approaches, the appraiser is then ready to document an estimated market value for the property at hand. It is important to note that while the appraised value is probably the strongest indication of what a property is worth, it may not be the final sales price. Depending on the individual 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 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 help you discover the most fair and balanced property value, so you can make profitable real estate decisions.