Home Appraisals: A Primer
Their home's purchase is the most serious transaction some of us may ever encounter. Whether it's a main residence, a second vacation property or a rental fixer upper, purchasing real property is an involved transaction that requires multiple people working in concert to see it through.
Practically all the participants are very familiar. The most recognizable entity in the transaction is the real estate agent. Next, the lender provides the financial capital needed to fund the exchange. And the title company makes sure that all areas of the transaction are completed and that a clear title transfers to the buyer from the seller.
So, who's responsible for making sure the value of the property is consistent with the amount being paid? This is where the appraiser comes in. 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 Slater Real Estate Services will ensure, you as an interested party, are informed.
Appraisals start with the property inspection
To ascertain an accurate status of the property, it's our duty to first conduct a thorough inspection. We must see features first hand, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really are there and are in the shape a typical buyer would expect them to be. To ensure the stated square footage has not been misrepresented and convey the layout of the property, the inspection often requires creating a sketch of the floorplan. Most importantly, the appraiser looks for any obvious amenities - or defects - that would have an impact on the value of the property.
Following the inspection, an appraiser uses two or three approaches to determining the value of the property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.
This is where the appraiser analyzes information on local construction costs, labor rates and other elements to determine how much it would cost to construct a property comparable to the one being appraised. This estimate often sets the maximum on what a property would sell for. The cost approach is also the least used method.
Appraisers are intimately familiar with the subdivisions in which they work. They thoroughly understand the value of particular features to the people 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 fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject.
An opinion of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. At Slater Real Estate Services, we are an authority when it comes to knowing the value of particular items in Windsor and Weld County neighborhoods. The sales comparison approach to value is most often given the most importance when an appraisal is for a real estate purchase.
Valuation Using the Income Approach
A third method of valuing a house is sometimes applied when a neighborhood has a measurable number of renter occupied properties. In this case, the amount of income the property yields is factored in with income produced by nearby properties to determine the current value.
Coming Up With The Final Value
Analyzing the data from all applicable approaches, the appraiser is then ready to put down 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 valueThere are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust the final price 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 they could recover in the event they had to sell the property again. At the end of the day, an appraiser from Slater Real Estate Services will guarantee you discover the most fair and balanced property value, so you can make the most informed real estate decisions.