A Description of the Appraisal ProcessAcquiring real estate can be the largest transaction many may ever make. Whether it's where you raise your family, a second vacation home or an investment, purchasing real property is a complex transaction that requires multiple people working in concert to see it through.
Most people are familiar with the parties having a role in the transaction. The most recognizable person in the exchange is the real estate agent. Then, the mortgage company provides the financial capital necessary to fund the deal. Ensuring all aspects of the exchange are completed and that the title is clear to pass from the seller to the buyer is the title company.
So what party is responsible for making sure the property is consistent with the amount being paid? This is where the appraiser comes in. 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 professional Idaho licensed appraiser from Adam's Appraisal Services will ensure you as an interested party are informed.
Inspecting the subject propertyOur first task at Adam's Appraisal Services is to inspect the property to ascertain its true status. We must see features hands on, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really are present and are in the condition a reasonable buyer would expect them to be. To make sure the stated square footage is accurate and document the layout of the property, the inspection often includes creating a sketch of the floor plan. Most importantly, we look for any obvious amenities - or defects - that would affect the value of the property.
Back at the office, we use two or three approaches when determining the value of real property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.
Cost ApproachHere, we pull information on local building costs, labor rates and other elements to ascertain how much it would cost to construct a property comparable to the one being appraised. This estimate usually sets the maximum on what a property would sell for. The cost approach is also the least used method.
Analyzing Comparable SalesAppraisers are intimately familiar with the neighborhoods in which they appraise. We innately understand the value of certain features to the residents of that area. Then, the appraiser researches recent transactions in the area and finds properties which are 'comparable' to the subject at hand. By assigning a dollar value to certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or extra 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.
Valuation Using the Income ApproachA third method of valuing a house is sometimes applied when a neighborhood has a reasonable number of renter occupied properties. In this situation, the amount of income the property yields is taken into consideration along with income produced by similar properties to derive the current value.
The Bottom LineExamining the data from all approaches, the appraiser is then ready to state an estimated market value for the property at hand. It is important to note that while this amount is probably the best indication of what a house would sell for in an open market, it may not be the final sales price. There are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust an offer or listing price up or down. But 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. The bottom line is: An appraiser from Adam's Appraisal Services will help you attain the most accurate property value, so you can make wise real estate decisions.