Making Sense of the Appraisal Process
Buying real estate is the most significant investment many may ever consider. It doesn't matter if 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 pull it all off.
It's likely you are familiar with the parties having a role in the transaction. The real estate agent is the most familiar person in the transaction. Then, the bank provides the money necessary to bankroll the transaction. And the title company ensures that all details of the transaction are completed and that the title is clear to transfer 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 opinion 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 Timberline Appraisals will ensure, you as an interested party, are informed.
Inspecting the subject property
Our first duty at Timberline Appraisals is to inspect the property to determine its true status. We must actually see aspects of the property, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they indeed are present and are in the condition a typical buyer would expect them to be. To ensure the stated size of the property has not been misrepresented and illustrate the layout of the property, the inspection often includes creating a sketch of the floorplan. Most importantly, we look 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 real property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.
This is where we analyze information on local construction costs, labor rates and other elements to determine how much it would cost to build a property nearly identical to the one being appraised. This estimate commonly sets the maximum on what a property would sell for. It's also the least used method.
Paired Sales Analysis
Appraisers become very familiar with the subdivisions in which they appraise. They innately understand the value of particular features to the homeowners of that area. Then, the appraiser researches recent transactions in the vicinity and finds properties which are 'comparable' to the property in question. 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 portray the features of subject property.
After all differences have been accounted for, 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 Brodhead and Green, Timberline Appraisals is your local authority. This approach to value is typically awarded the most consideration when an appraisal is for a real estate exchange.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - we may use a third method of valuing a property. In this case, the amount of revenue the property yields is factored in with income produced by comparable properties to give an indicator of the current value.
The Bottom Line
Examining the data from all applicable approaches, the appraiser is then ready to document an estimated market value for the property at hand. The estimate of value on the appraisal report is not always the final sales price 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.Regardless, the appraised value is often employed 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 Timberline Appraisals will guarantee you get the most fair and balanced property value, so you can make wise real estate decisions.