![]() Decoding the Appraisal ProcessA home purchase is the biggest financial decision most of us might ever make. It doesn't matter if where you raise your family, a second vacation property or one of many rentals, the purchase of real property is a detailed transaction that requires multiple parties to make it all happen. Most people are familiar with the parties taking part in the transaction. The most known entity in the transaction is the real estate agent. Then, the bank provides the money necessary to finance the transaction. And ensuring all areas of the exchange are completed and that a clear title passes to the buyer from the seller is the title company. So, what party is responsible for making sure the value of the real estate is consistent with the purchase price? This is where you meet the appraiser. We provide an unbiased opinion of what a buyer could expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Property Valuation Group will ensure, you as an interested party, are informed. The inspection is where an appraisal beginsTo ascertain the true status of the property, it's our duty to first perform a thorough inspection. We must see features first hand, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really are present and are in the shape a typical person would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is accurate and illustrating the layout of the property. Most importantly, the appraiser identifies any obvious amenities - or defects - that would have an impact on the value of the house. Following the inspection, an appraiser uses two or three approaches to determining the value of the property: sales comparison and, in the case of a rental property, an income approach. ![]() Replacement CostHere, we gather information on local construction costs, the cost of labor and other factors to calculate how much it would cost to construct a property similar to the one being appraised. This figure commonly sets the maximum on what a property would sell for. The cost approach is also the least used method. ![]() Sales ComparisonAppraisers get to know the subdivisions in which they work. They innately understand the value of particular features to the residents of that area. Then, the appraiser researches recent transactions in close proximity to the subject and finds properties which are 'comparable' to the subject at hand. Using knowledge of the value of certain items such as square footage, additional bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we 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 appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. When it comes to knowing the true value of features of homes in Ferndale and Oakland, Property Valuation Group can't be beat. This approach to value is most often awarded the most importance when an appraisal is for a home sale. Valuation Using the Income ApproachIn the case of income producing properties - rental houses for example - we may use an additional method of valuing a property. In this scenario, the amount of income the real estate generates is factored in with income produced by neighboring properties to determine the current value. Putting It All TogetherCombining information from all applicable approaches, the appraiser is then ready to state an estimated market value for the subject property. It is important to note that while this amount is probably the best indication of what a house is worth, it may not be the final sales price. Depending on the individual circumstances 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.Regardless, the appraised value is typically employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. Here's what it all boils down to, an appraiser from Property Valuation Group will guarantee you discover the most fair and balanced property value, so you can make the most informed real estate decisions. |