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Home Appraisals: A Primer

Their home's purchase is the most serious financial decision most could ever make. It doesn't matter if a main residence, a seasonal vacation home or one of many rentals, purchasing real property is an involved transaction that requires multiple parties to pull it all off.

The majority of the people involved are very familiar. The most recognizable person in the exchange is the real estate agent. Next, the lender provides the financial capital required to fund the exchange. The title company sees to it that all details of the transaction are completed and that a clear title passes to the buyer from the seller.

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

So, what party makes sure the value of the property is in line with the purchase price? This is where you meet the appraiser. 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 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 see features hands on, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really are present and are in the condition a reasonable person would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is accurate and illustrating the layout of the property. Most importantly, the appraiser looks for any obvious features - or defects - that would have an impact on the value of the house.

Back at the office, an appraiser uses 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.

Replacement Cost

Here, the appraiser analyzes information on local construction costs, labor rates and other factors to calculate how much it would cost to construct a property nearly identical to the one being appraised. This value usually sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.

Sales Comparison

Appraisers are intimately familiar with the communities in which they appraise. They innately understand the value of certain 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. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, extra 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.

  • If, for example, the comparable property has an extra half bath that the subject doesn't, the appraiser may subtract the value of that half bath from the sales price of the comparable.
  • 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 putting a value on features of homes in Lawton and Comanche, Barnes Appraisal Company is second to none. The sales comparison approach to value is most often awarded the most weight when an appraisal is for a real estate sale.

Valuation Using the Income Approach

A third way of valuing a house is sometimes used when an area has a measurable number of rental properties. In this situation, the amount of income the real estate produces is factored in with income produced by similar properties to give an indicator of the current value.

Reconciliation

Combining information from all approaches, the appraiser is then ready to state an estimated market value for the subject property. Note: While the appraised value is probably the most accurate indication of what a house is worth, it may not be the price at which the property closes. There are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust an offer or listing price up or down. But the appraised value is often used as a guideline for lenders who don't want to loan a buyer more money than they could get back in case they had to sell the property again. Here's what it all boils down to, an appraiser from Barnes Appraisal Company will help you attain the most fair and balanced property value, so you can make wise real estate decisions.