Making Sense of the Appraisal ProcessTheir home's purchase is the most significant investment most of us might ever make. Whether it's a main residence, a second vacation property or an investment, the purchase of real property is a complex transaction that requires multiple parties to see it through. Most people are familiar with the parties taking part in the transaction. The real estate agent is the most known entity in the transaction. Next, the bank provides the money necessary to bankroll the deal. And ensuring all areas of the exchange are completed and that the title is clear to pass from the seller to the purchaser is the title company. So, what party is responsible for making sure the value of the real estate is in line with the amount being paid? This is where the appraiser comes in. We provide an unbiased estimate of what a buyer might 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 Frisby Appraisal Services will ensure, you as an interested party, are informed. The inspection is where an appraisal startsTo determine an accurate status of the property, it's our duty to first complete a thorough inspection. 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 buyer would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is accurate and illustrating the layout of the property. Most importantly, the appraiser looks for any obvious amenities - or defects - that would affect the value of the property. Back at the office, an appraiser uses two or three approaches to determining the value of real property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent. Replacement CostThis is where we pull information on local building costs, the cost of labor and other elements to figure out how much it would cost to replace the property being appraised. This estimate often sets the upper limit on what a property would sell for. The cost approach is also the least used predictor of value. Paired Sales AnalysisAppraisers become very familiar with the communities in which they work. They thoroughly understand the value of certain features to the people of that area. Then, the appraiser researches recent transactions in the vicinity and finds properties which are 'comparable' to the property in question. By assigning a dollar value to 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 portray the features of subject.
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. At Frisby Appraisal Services, we are experts when it comes to knowing the worth of particular items in Fort Wayne and Allen County neighborhoods. This approach to value is usually awarded the most consideration when an appraisal is for a home purchase. Valuation Using the Income ApproachIn the case of income producing properties - rental houses for example - the appraiser may use a third method of valuing a house. In this situation, the amount of income the property produces is taken into consideration along with income produced by comparable properties to determine the current value. The Bottom LineExamining 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 probably will not be the price at which the property closes. Depending on the individual 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 typically employed as a guideline for lenders who don't want to loan a buyer more money than they could get back in case they had to put the property on the market again. At the end of the day, an appraiser from Frisby Appraisal Services will guarantee you discover the most accurate property value, so you can make the most informed real estate decisions. |