Real Property Appraisals: A Primer
A home purchase can be the biggest financial decision most might ever encounter. Whether it's a primary residence, a seasonal vacation property or an investment, the purchase of real property is an involved financial transaction that requires multiple people working in concert to pull it all off.
Most people are familiar with the parties taking part in the transaction. The most recognizable person in the exchange is the real estate agent. Next, the bank provides the money necessary to bankroll the exchange. And ensuring all aspects 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 property is in line 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 licensed, certified, professional appraiser from V C Appraisals will ensure, you as an interested party, are informed.
Inspecting the subject property
Our first task at V C Appraisals is to inspect the property to ascertain its true status. We must actually see aspects of the property, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they really are there and are in the shape a typical person would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is proper and conveying the layout of the property. Most importantly, we identify any obvious amenities - or defects - that would have an impact on the value of the property.
After the inspection, we use two or three approaches to determining the value of real property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.
This is where we pull information on local construction costs, the cost of labor and other elements to figure out how much it would cost to replace the property being appraised. This value 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 thoroughly understand the value of specific features to the people of that area. Then, the appraiser looks up recent sales in the neighborhood and finds properties which are 'comparable' to the property at hand. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, extra bathrooms or bedrooms, or quality of construction, we add or subtract from each comparable's sales price so that they more accurately match the features of subject property.
Once all necessary adjustments have been made, 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 valuing features of homes in Oklahoma City and Oklahoma, V C Appraisals can't be beat. This approach to value is usually given the most weight when an appraisal is for a real estate purchase.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - the appraiser may use an additional method of valuing real estate. In this situation, the amount of income the real estate produces is taken into consideration along with other rents in the area for comparable properties to give an indicator of the current value.
Putting It All Together
Examining the data from all applicable approaches, the appraiser is then ready to state an estimated market value for the subject property. The estimate of value on the appraisal report is not necessarily what's being paid for the property even though it is likely the best indication of what a property is worth. 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 used as a guideline for lenders who don't want to loan a buyer more money than they could recover in case they had to put the property on the market again. Here's what it all boils down to, an appraiser from V C Appraisals will guarantee you discover the most accurate property value, so you can make profitable real estate decisions.