A Description of the Appraisal Process
Their home's purchase can be the biggest investment many of us will ever encounter. Whether it's where you raise your family, an additional vacation property or an investment, purchasing real property is an involved transaction that requires multiple people working in concert to pull it all off.
Practically all the participants are quite familiar. The real estate agent is the most known face in the exchange. Next, the lender provides the financial capital necessary to bankroll the deal. And the title company makes sure that all aspects of the sale are completed and that the title is clear to transfer to the buyer from the seller.
So, what party 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 DCAppraisals, LLC will ensure, you as an interested party, are informed.
The inspection is where an appraisal begins
Our first task at DCAppraisals, LLC 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, amenities, etc., to ensure they indeed exist and are in the shape a typical buyer would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is accurate and conveying the layout of the property. Most importantly, the appraiser looks for any obvious amenities - 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 the property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.
Here, we analyze information on local building costs, the cost of labor and other elements to derive how much it would cost to replace the property being appraised. This figure commonly sets the maximum on what a property would sell for. The cost approach is also the least used method.
Paired Sales Analysis
Appraisers get to know the neighborhoods in which they appraise. They innately understand the value of specific features to the people of that area. Then, the appraiser researches recent sales in the vicinity and finds properties which are 'comparable' to the real estate being appraised. By assigning a dollar value to certain items such as upgraded appliances, extra bathrooms, additional living area, quality of construction, lot size, we add or subtract from each comparable's sales price so that they more accurately portray the features of subject property.
Once all necessary adjustments have been made, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At DCAppraisals, LLC, we are an authority when it comes to knowing the value of particular items in and Oklahoma County neighborhoods. The sales comparison approach to value is commonly given the most weight when an appraisal is for a real estate sale.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - the appraiser may use an additional way of valuing real estate. In this case, the amount of revenue the real estate produces is taken into consideration along with other rents in the area for comparable properties to determine the current value.
Coming Up With The Final Value
Examining the data from all approaches, the appraiser is then ready to document an estimated market value for the property in question. The estimate of value at the bottom of the appraisal report is not always what's being paid for the property even though it is likely the best indication of what a property is worth. There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust the final 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 the property is actually worth. The bottom line is, an appraiser from DCAppraisals, LLC will help you discover the most fair and balanced property value, so you can make wise real estate decisions.
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