What Are the Parts of an Appraisal?
Their home's purchase is the largest investment some people may ever encounter. It doesn't matter if where you raise your family, a second vacation home or an investment, the purchase of real property is a detailed transaction that requires multiple people working in concert to make it all happen.
It's likely you are familiar with the parties taking part in the transaction. The real estate agent is the most recognizable entity in the exchange. Then, the bank provides the money needed to fund the deal. And ensuring all aspects of the exchange are completed and that the title is clear to pass to the buyer from the seller 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 opinion 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 Petersen Appraising, Inc will ensure, you as an interested party, are informed.
Appraisals start with the inspection
Our first task at Petersen Appraising, Inc 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 truly are present and are in the condition a typical buyer would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is correct and conveying the layout of the property. Most importantly, we look for any obvious features - or defects - that would affect the value of the property.
Following the inspection, we use two or three approaches to determining the value of real property: sales comparison and, in the case of a rental property, an income approach.
Here, we use information on local building costs, labor rates and other factors to ascertain how much it would cost to build a property nearly identical to the one being appraised. This figure commonly sets the maximum on what a property would sell for. It's also the least used method.
Analyzing Comparable Sales
Appraisers are intimately familiar with the neighborhoods in which they work. They innately understand the value of specific features to the people of that area. Then, the appraiser researches 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 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 more accurately match 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 Petersen Appraising, Inc, we are experts in knowing the value of particular items in Spanish Fork and Utah County neighborhoods. This approach to value is most often given the most importance 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 method of valuing a property. In this situation, the amount of income the property produces is factored in with income produced by similar properties to determine the current value.
The Bottom Line
Analyzing the data from all approaches, the appraiser is then ready to document an estimated market value for the property at hand. 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. 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.Regardless, the appraised value is often employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. At the end of the day, an appraiser from Petersen Appraising, Inc will guarantee you attain the most accurate property value, so you can make profitable real estate decisions.