Understanding the Appraisal Process
Purchasing a home is the biggest transaction some may ever encounter. It doesn't matter if a main residence, an additional vacation property or an investment, purchasing real property is a detailed financial transaction that requires multiple parties to pull it all off.
The majority of the participants are quite familiar. The real estate agent is the most familiar face in the transaction. Next, the mortgage company provides the money necessary to finance the transaction. And the title company ensures that all requirements of the transaction are completed and that a clear title transfers from the seller to the purchaser.
So, who makes 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 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 Hiland Appraisals, LLC will ensure, you as an interested party, are informed.
The inspection is where an appraisal begins
To ascertain an accurate status of the property, it's our responsibility to first perform a thorough inspection. We must physically see aspects of the property, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really exist and are in the condition a reasonable buyer would expect them to be. To ensure the stated square footage is accurate and describe the layout of the property, the inspection often requires creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious amenities - or defects - that would affect the value of the property.
Back at the office, we use two or three approaches to determining the value of the property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.
This is where the appraiser pulls information on local construction costs, the cost of labor and other elements to derive how much it would cost to replace the property being appraised. This estimate usually sets the upper limit on what a property would sell for. The cost approach is also the least used method.
Analyzing Comparable Sales
Appraisers get to know the communities in which they appraise. They thoroughly understand the value of particular features to the residents of that area. Then, the appraiser researches recent transactions in the area and finds properties which are 'comparable' to the real estate at hand. Using knowledge of the value of certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or additional storage space, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject property.
An opinion of what the subject could 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 worth of features of homes in Lansing and Ashe, Hiland Appraisals, LLC can't be beat. This approach to value is most often given the most importance when an appraisal is for a home sale.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - we may use a third approach to value. In this situation, the amount of income the property produces is factored in with other rents in the area for comparable properties to determine the current value.
Combining information from all approaches, the appraiser is then ready to stipulate an estimated market value for the property at hand. It is important to note that while this amount is probably the most reliable indication of what a property is worth, it may not be the final sales price. It'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'. But the appraised value is typically used as a guideline for lenders who don't want to loan a buyer more money than they could get back in case they had to sell the property again. The bottom line is, an appraiser from Hiland Appraisals, LLC will help you get the most fair and balanced property value, so you can make the most informed real estate decisions.