An Overview of the Appraisal Process
A home purchase is the most serious investment most of us might ever consider. Whether it is a primary residence, a vacation property or an investment, the purchase of real property is a complex financial transaction that requires multiple parties to see it through.
The real estate agent is generally the most familiar entity in the transaction. A mortgage company provides the money needed to finance the exchange. The title company makes sure that all areas of the exchange are completed and that the title is clear to pass to the buyer from the seller.
The appraiser provides an unbiased estimate of what a buyer might expect to pay — or a seller receive — for a property. Both the buyer and the seller should be well informed. A licensed, certified, professional appraiser from Alaska Real Estate Appraisal will ensure all parties are informed.
The Inspection is Where an Appraisal Starts
To ascertain the true value of a property, it's our duty to first conduct a thorough inspection. We must physically see aspects of the property, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they truly are there and are in the condition a typical person would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is correct and illustrating the layout of the property. Most importantly, we identify any obvious features - or defects - that would affect the value of the house.
Back at the office, an appraiser uses two or three approaches to determining the value of real property: paired sales analysis and, in the case of a rental property, an income approach.
Here, we analyze information on local building costs, labor rates and other factors to derive how much it would cost to construct a property similar to the one being appraised. This value usually sets the maximum on what a property would sell for. The cost approach is also the least used method.
Paired Sales Analysis
Appraisers are very familiar with the communities in which they work. They thoroughly understand the value of specific features to the people of that area. By using recent sales in close proximity to the subject an appraiser finds properties which are 'comparable' to the property being appraised. By assigning a dollar value to certain amenities such as fireplaces, built-in appliance upgrades, and quality of construction, an appraiser will add or subtract from each comparable's sales price so that they more accurately match the features of subject property.
After all differences have been accounted for, the adjusted sales prices are reconciled and the appraiser concludes an opinion of value for the subject property.
Valuation Using the Income Approach
A third method of valuing a property is sometimes applied when a neighborhood has a measurable number of rental properties. In this situation, the amount of revenue the real estate yields is factored in with other rents in the area for comparable properties to derive the current value.
Arriving at a Value Conclusion
Analyzing the data from applicable approaches, an appraiser is ready to state an estimated market value for the subject property. The estimate of value at the bottom of 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 value. Prices can always 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 employed as a guideline for lenders who don't want to loan a buyer more money than they could get back in the event they had to sell the property again. It all comes down to this, an appraiser from Alaska Real Estate Appraisal will guarantee you attain the most fair and balanced property value, so you can make wise real estate decisions.