Understanding the Appraisal Process
Their home's purchase is the most important financial decision most could ever consider. It doesn't matter if a primary residence, an additional vacation home or a rental fixer upper, the purchase of real property is a detailed transaction that requires multiple parties to make it all happen.
Most people are familiar with the parties having a role in the transaction. The most recognizable face in the transaction is the real estate agent. Then, the lender provides the money required to bankroll the transaction. The title company sees to it that all requirements of the exchange are completed and that the title is clear to transfer to the buyer from the seller.
So, who makes sure the property is worth the purchase price? This is where the appraiser comes in. 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 1 Valuations will ensure, you as an interested party, are informed.
Inspecting the subject property
Our first task at 1 Valuations is to inspect the property to ascertain its true status. We must actually view aspects of the property, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed exist and are in the shape a reasonable buyer would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is accurate and conveying the layout of the property. Most importantly, the appraiser identifies any obvious features - or defects - that would have an impact on the value of the property.
Back at the office, 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 the appraiser pulls information on local construction costs, labor rates and other factors to derive how much it would cost to build a property nearly identical to the one being appraised. This figure usually sets the upper limit on what a property would sell for. It's also the least used predictor of value.
Appraisers are intimately familiar with the neighborhoods in which they work. They thoroughly understand the value of certain 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 real estate at hand. By assigning a dollar value to certain items such as square footage, extra bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we adjust the comparable properties so that they more accurately match the features of subject.
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 putting a value on features of homes in Monument and El Paso, 1 Valuations is your local authority. 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
A third way of valuing real estate is sometimes used when an area has a reasonable number of rental properties. In this situation, the amount of revenue the real estate yields is taken into consideration along with income produced by neighboring properties to derive the current value.
Putting It All Together
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 what a property is worth. Depending on the specific 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.Regardless, 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 the event they had to put the property on the market again. Here's what it all boils down to, an appraiser from 1 Valuations will guarantee you discover the most accurate property value, so you can make wise real estate decisions.