Making Sense of the Appraisal Process
A home purchase is the largest transaction many people might ever encounter. Whether it's a main residence, a second vacation property or one of many rentals, purchasing real property is a detailed financial transaction that requires multiple parties to make it all happen.
Most of the people involved are quite familiar. The real estate agent is the most familiar face in the exchange. Then, the bank provides the money necessary to finance the transaction. And the title company makes sure that all requirements of the exchange are completed and that a clear title transfers to the buyer from the seller.
So, what party is responsible for making sure the property 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 property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Lundquist Appraisals & Real Estate Services will ensure, you as an interested party, are informed.
The inspection is where an appraisal starts
Our first task at Lundquist Appraisals & Real Estate Services is to inspect the property to determine its true status. We must see features first hand, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they really are present and are in the condition a typical person would expect them to be. To make sure the stated square footage is accurate and convey the layout of the property, the inspection often entails creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious features - or defects - that would have an impact on the value of the property.
After the inspection, an appraiser uses two or three approaches to determining the value of the property: sales comparison and, in the case of a rental property, an income approach.
Here, the appraiser gathers information on local construction costs, labor rates and other elements to determine how much it would cost to replace the property being appraised. This estimate usually sets the maximum on what a property would sell for. It's also the least used method.
Analyzing Comparable Sales
Appraisers become very familiar with the subdivisions in which they appraise. They innately understand the value of certain features to the homeowners of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the home at hand. 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 are more accurately in line with the features of subject.
A true estimate of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. At Lundquist Appraisals & Real Estate Services, we are experts in knowing the value of particular items in Wabash and Wabash County neighborhoods. The sales comparison approach to value is most often given the most weight when an appraisal is for a real estate exchange.
Valuation Using the Income Approach
A third method of valuing approach to value is sometimes used when an area has a reasonable number of rental properties. In this scenario, the amount of revenue the real estate generates is taken into consideration along with other rents in the area for comparable properties to derive the current value.
Coming Up With The Final Value
Examining the data from all approaches, the appraiser is then ready to state 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 a property's valueDepending on the individual circumstances 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 often used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. Here's what it all boils down to, an appraiser from Lundquist Appraisals & Real Estate Services will guarantee you attain the most accurate property value, so you can make the most informed real estate decisions.