Making Sense of the Appraisal Process

Purchasing a home can be the most serious transaction most people could ever consider. Whether it's a main residence, an additional vacation property or one of many rentals, purchasing real property is an involved financial transaction that requires multiple people working in concert to see it through.

Most people are familiar with the parties taking part in the transaction. The most known face in the exchange is the real estate agent. Then, the lender provides the financial capital needed to bankroll the deal. The title company ensures that all aspects of the exchange are completed and that the title is clear to pass from the seller to the purchaser.

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So, who makes sure the property is worth the amount being paid? In comes the appraiser. 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 Steven C. Guy will ensure, you as an interested party, are informed.

The inspection is where an appraisal begins

Our first task at Steven C. Guy is to inspect the property to determine its true status. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they really exist and are in the condition a reasonable buyer would expect them to be. To make sure the stated size of the property is accurate and convey the layout of the home, the inspection often entails creating a sketch of the floorplan. Most importantly, we look for any obvious features - or defects - that would have an impact on the value of the house.

Next, 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.

Replacement Cost

This is where we gather information on local building costs, the cost of labor and other factors to calculate how much it would cost to replace the property being appraised. This figure usually sets the upper limit on what a property would sell for. It's also the least used method.

Analyzing Comparable Sales

Appraisers can tell you a lot about the subdivisions in which they work. They thoroughly understand the value of certain features to the homeowners of that area. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are 'comparable' to the property in question. 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 more accurately match the features of subject.

  • Say, for example, the comparable has an irrigation system and the subject does not, the appraiser may deduct the value of an irrigation system from the sales price of the comparable.
  • However, if the subject property has an extra half-bathroom and the comparable does not, the appraiser might add an amount to the comparable property.

A valid estimate of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. When it comes to knowing the true value of features of homes in North Wales and Montgomery, Steven C. Guy can't be beat. The sales comparison approach to value is commonly given the most importance when an appraisal is for a real estate purchase.

Valuation Using the Income Approach

A third way of valuing approach to value is sometimes applied when an area has a reasonable number of renter occupied properties. In this case, the amount of income the real estate produces is factored in with other rents in the area for comparable properties to give an indicator of the current value.

Coming Up With The Final Value

Examining the data from all applicable 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 necessarily 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 used 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 Steven C. Guy will help you discover the most accurate property value, so you can make profitable real estate decisions.