Understanding the Appraisal Process
Purchasing a house can be the largest transaction many could ever consider. Whether it's where you raise your family, a second vacation property or a rental fixer upper, purchasing real property is a complex transaction that requires multiple parties to make it all happen.
It's likely you are familiar with the parties having a role in the transaction. The real estate agent is the most familiar entity in the exchange. Then, the bank provides the financial capital necessary to finance the deal. And ensuring all areas of the sale 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 real estate 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 parcel of real estate, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Jennings A will ensure, you as an interested party, are informed.
Appraisals start with the home inspection
To determine an accurate status of the property, it's our duty to first complete a thorough inspection. We must physically view aspects of the property, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really are present and are in the shape a reasonable buyer would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is proper and illustrating the layout of the property. Most importantly, we look for any obvious amenities - or defects - that would have an impact on the value of the property.
Following the inspection, we use 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, the appraiser pulls information on local building costs, the cost of labor and other factors to determine how much it would cost to replace the property being appraised. This figure often sets the maximum on what a property would sell for. It's also the least used method.
Appraisers are intimately familiar with the neighborhoods in which they work. They thoroughly understand the value of specific features to the people of that area. Then, the appraiser looks up recent transactions in the area and finds properties which are 'comparable' to the property at hand. By assigning a dollar value to certain items such as upgraded appliances, extra bathrooms, additional living area, quality of construction, lot size, we add or subtract from each comparable's sales price so that they more accurately portray the features of subject property.
A true estimate of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. When it comes to putting a value on features of homes in Stow and Summit, Jennings A can't be beat. This approach to value is commonly given the most importance when an appraisal is for a real estate purchase.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - the appraiser may use a third approach to value. In this case, the amount of income the property generates is factored in with income produced by nearby properties to determine the current value.
Coming Up With The Final Value
Analyzing the data from all applicable approaches, the appraiser is then ready to document an estimated market value for the property at hand. Note: While the appraised value is probably the best indication of what a house 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 the property is actually worth. At the end of the day, an appraiser from Jennings A will help you get the most fair and balanced property value, so you can make the most informed real estate decisions.