Home Appraisals: A PrimerPurchasing a house can be the most important transaction most people may ever encounter. It doesn't matter if it's where you raise your family, a second vacation home or one of many rentals, the purchase of real property is a detailed financial transaction that requires multiple parties to see it through.
Most people are familiar with the parties having a role in the transaction. The real estate agent is the most recognizable face in the transaction. Then, the mortgage company provides the financial capital necessary to fund the deal. Ensuring all areas of the exchange are completed and that a clear title transfers to the buyer from the seller is the title company.
So what party makes sure the value of the real estate is in line with the amount being paid? This is where you meet the appraiser. We provide an unbiased opinion of what a buyer might expect to pay - or a seller receive - for a parcel of real estate, where both buyer and seller are informed parties. A professional Ohio licensed appraiser from Teresa Peterson & Associates will ensure you as an interested party are informed.
Appraisals start with the property inspectionTo determine an accurate status of the property, it's our responsibility to first complete a thorough inspection. 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 truly are present and are in the shape a typical person would expect them to be. The inspection often includes a sketch of the floor plan, ensuring the square footage is proper and illustrating the layout of the property. Most importantly, the appraiser identifies any obvious amenities - or defects - that would affect the value of the property.
Back at the office, an appraiser employs two or three approaches when determining the value of the property: paired sales analysis and, in the case of a rental property, an income approach.
Cost ApproachHere, the appraiser uses information on local construction costs, labor rates and other factors to figure out how much it would cost to replace the property being appraised. This value commonly sets the upper limit on what a property would sell for. It's also the least used method.
Paired Sales AnalysisAppraisers become very familiar with the neighborhoods in which they work. We innately understand the value of specific features to the people of that area. Then, the appraiser looks up recent sales in the vicinity and finds properties which are 'comparable' to the property being appraised. Using knowledge of the value of certain items such as upgraded appliances, additional bathrooms, an additional living area, quality of construction, lot size, we add or subtract from each comparable's sales price so that they more accurately match the features of subject.
Valuation Using the Income ApproachIn the case of income producing properties - rental houses for example - we may use a third approach to value. In this case, the amount of income the property generates is factored in with other rents in the area for comparable properties to give an indicator of the current value.
Arriving at a Value ConclusionAnalyzing the data from all approaches, the appraiser is then ready to put down an estimated market value for the property at hand. The estimate of value on the appraisal report is not necessarily the final sales price even though it is likely the best indication of a property's market value Depending on the individual situations 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 typically used as a guideline for lenders who don't want to loan a buyer more money than the property would likely sell for in an open marketplace. The bottom line is: An appraiser from Teresa Peterson & Associates will help you discover the most accurate property value, so you can make wise real estate decisions.