What Goes Into an Appraisal?
Purchasing a home is the most serious investment most of us may ever encounter. Whether it's where you raise your family, a second vacation property or one of many rentals, the purchase of real property is an involved financial transaction that requires multiple people working in concert to pull it all off.
You're probably familiar with the parties having a role in the transaction. The most recognizable face in the exchange is the real estate agent. Next, the lender provides the money required to bankroll the deal. The title company makes sure that all areas of the exchange are completed and that a clear title passes from the seller to the purchaser.
So, who's responsible for making sure the real estate is worth the purchase price? This is where you meet the appraiser. We provide an unbiased estimate of what a buyer might expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from OK Appraisals 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 duty to first conduct 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 there and are in the shape a typical buyer would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is accurate and conveying the layout of the property. Most importantly, we look for any obvious features - or defects - that would affect the value of the house.
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.
This is where the appraiser uses information on local building costs, the cost of labor and other elements to determine how much it would cost to replace the property being appraised. This value often sets the maximum on what a property would sell for. It's also the least used predictor of value.
Analyzing Comparable Sales
Appraisers can tell you a lot about the subdivisions in which they work. They thoroughly understand the value of certain features to the homeowners of that area. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are 'comparable' to the home in question. 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 are more accurately in line with the features of subject property.
An opinion 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 Oklahoma City and Oklahoma, OK Appraisals is your local authority. The sales comparison approach to value is typically given the most importance when an appraisal is for a home purchase.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - we may use an additional method of valuing real estate. In this scenario, the amount of revenue the real estate produces is factored in with income produced by similar properties to give an indicator of the current value.
Putting It All Together
Combining information from all approaches, the appraiser is then ready to state an estimated market value for the property in question. Note: While the appraised value is probably the strongest indication of what a house is worth, it probably will not be the price at which the property closes. Depending on the specific 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.But the appraised value is often employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. It all comes down to this, an appraiser from OK Appraisals will guarantee you attain the most accurate property value, so you can make wise real estate decisions.