What Are the Parts of an Appraisal?
Their home's purchase can be the biggest investment many people will ever encounter. It doesn't matter if where you raise your family, an additional vacation home or an investment, the purchase of real property is an involved transaction that requires multiple people working in concert to pull it all off.
The majority of the people involved are very familiar. The most known person in the transaction is the real estate agent. Then, the bank provides the financial capital necessary to finance the transaction. The title company makes sure that all requirements of the exchange are completed and that a clear title transfers from the seller to the purchaser.
So, what party is responsible for making sure the real estate is worth the amount being paid? In comes the appraiser. We provide an unbiased estimate of what a buyer could expect to pay — or a seller receive — for a parcel of real estate, 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 home inspection
Our first task at Petersen Appraising, Inc is to inspect the property to determine its true status. We must physically see features, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really are there and are in the condition a reasonable buyer would expect them to be. To ensure the stated square footage is accurate and illustrate the layout of the house, the inspection often includes creating a sketch of the floorplan. Most importantly, we identify any obvious amenities - or defects - that would have an impact on the value of the property.
After the inspection, we use two or three approaches to determining the value of the property: sales comparison and, in the case of a rental property, an income approach.
This is where we pull information on local building costs, labor rates and other elements to figure out how much it would cost to build a property nearly identical to the one being appraised. This value commonly sets the upper limit on what a property would sell for. The cost approach is also the least used predictor of value.
Paired Sales Analysis
Appraisers get to know the neighborhoods in which they work. They innately understand the value of certain features to the residents of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the property at hand. 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 are more accurately in line with 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. When it comes to associating a value with features of homes in Spanish Fork and Utah, Petersen Appraising, Inc can't be beat. The sales comparison approach to value is usually given the most weight when an appraisal is for a real estate purchase.
Valuation Using the Income Approach
A third method of valuing real estate is sometimes used when a neighborhood has a reasonable number of rental properties. In this scenario, the amount of revenue the real estate yields is taken into consideration along with income produced by similar properties to determine the current value.
The Bottom Line
Combining information from all approaches, the appraiser is then ready to document an estimated market value for the property in question. The estimate of value on the appraisal report is not always what's being paid for the property even though it is likely the best indication of a property's valueIt's not uncommon for prices to be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. Regardless, the appraised value is typically employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. It all comes down to this, an appraiser from Petersen Appraising, Inc will guarantee you get the most fair and balanced property value, so you can make wise real estate decisions.