What Goes Into an Appraisal?
Getting real estate can be the most significant transaction many people will ever consider. Whether it's a primary residence, a second vacation property or a rental fixer upper, the purchase of real property is an involved transaction that requires multiple people working in concert to see it through.
It's likely you are familiar with the parties having a role in the transaction. The real estate agent is the most known entity in the transaction. Then, the bank provides the financial capital necessary to bankroll the exchange. And the title company makes sure that all requirements of the exchange are completed and that a clear title passes to the buyer from the seller.
So, what party makes sure the real estate is worth the amount being paid? This is where the appraiser comes in. We provide an unbiased opinion 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 Valiant Appraisal Services will ensure, you as an interested party, are informed.
Appraisals begin with the property observation
To determine the true status of the property, it's our responsibility to first conduct a thorough observation. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really exist and are in the condition a typical person would expect them to be. To make sure the stated size of the property is accurate and convey the layout of the home, the observation often includes creating a sketch of the floor plan. Most importantly, the appraiser looks for any obvious amenities - or defects - that would have an impact on the value of the house.
Once the site has been observed, we use two or three approaches to determining the value of the property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.
Here, the appraiser pulls information on local building costs, labor rates and other factors to determine how much it would cost to replace the property being appraised. This estimate usually sets the upper limit on what a property would sell for. It's also the least used method.
Analyzing Comparable Sales
Appraisers get to know the subdivisions in which they appraise. They innately understand the value of specific features to the people of that area. Then, the appraiser researches recent sales in the vicinity and finds properties which are 'comparable' to the property being appraised. 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.
In the end, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At Valiant Appraisal Services, we are an authority in knowing the worth of real estate features in Philadelphia and the surrounding neighborhoods. This approach to value is usually given the most importance when an appraisal is for a real estate sale.
Valuation Using the Income Approach
A third method of valuing approach to value is sometimes employed when an area has a measurable number of rental properties. In this scenario, the amount of income the real estate generates is factored in with other rents in the area for comparable properties to derive the current value.
Combining information from all applicable approaches, the appraiser is then ready to put down an estimated market value for the property at hand. The estimate of value on the appraisal report is not always what's being paid for the property even though it is likely the best indication of a property's value. 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'. Regardless, the appraised value is often used 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 Valiant Appraisal Services will guarantee you discover the most accurate property value, so you can make the most informed real estate decisions.