A Description of the Appraisal ProcessGetting a home can be the largest transaction most of us could ever make. It doesn't matter if it's a primary residence, an additional vacation home or an investment, purchasing real property is a detailed transaction that requires multiple people working in concert to make it all happen.
The majority of the participants are very familiar. The most familiar entity in the exchange is the real estate agent. Next, the bank provides the money needed to finance the deal. Ensuring all requirements of the transaction are completed and that a clear title passes to the buyer from the seller is the title company.
So who's responsible for making sure the value of the property is consistent with the purchase price? In comes the appraiser. We provide an unbiased estimate of what a buyer could expect to pay - or a seller receive - for a property, where both buyer and seller are informed parties. A professional Pennsylvania licensed appraiser from All Service Real Estate will ensure you as an interested party are informed.
Inspecting the subject propertyOur first task at All Service Real Estate is to inspect the property to determine its true status. We must actually view aspects of the property, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly exist and are in the condition a reasonable person would expect them to be. To make sure the stated size of the property is accurate and illustrate the layout of the house, the inspection often entails creating a sketch of the floor plan. Most importantly, the appraiser identifies any obvious amenities - or defects - that would have an impact on the value of the property.
Following the inspection, an appraiser employs two or three approaches when determining the value of real property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.
Replacement CostHere, the appraiser pulls information on local construction costs, labor rates and other factors to derive how much it would cost to construct a property comparable to the one being appraised. This value often sets the upper limit on what a property would sell for. It's also the least used predictor of value.
Paired Sales AnalysisAppraisers are intimately familiar with the communities in which they work. We thoroughly understand the value of particular features to the residents of that area. Then, the appraiser researches recent sales in the vicinity and finds properties which are 'comparable' to the subject at hand. Using knowledge of the value of certain items such as upgraded appliances, additional bathrooms, an additional living area, quality of construction, lot size, we adjust the comparable properties so that they are more accurately in line with the features of subject property.
Valuation Using the Income ApproachIn the case of income producing properties - rental houses for example - we may use a third approach to value. In this case, the amount of revenue the property produces is taken into consideration along with income produced by neighboring properties to derive the current value.
Putting It All TogetherExamining the data from all applicable approaches, the appraiser is then ready to document an estimated market value for the property at hand. The estimate of value at the bottom of the appraisal report is not always the final sales price 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'. 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. The bottom line is: An appraiser from All Service Real Estate will help you attain the most accurate property value, so you can make the most informed real estate decisions.