Real Estate Appraisals: A Primer
Purchasing a house is the most serious financial decision many people may ever encounter. Whether it's where you raise your family, a seasonal vacation home or an investment, purchasing real property is a complex financial transaction that requires multiple parties to make it all happen.
It's likely you are familiar with the parties having a role in the transaction. The most familiar face in the transaction is the real estate agent. Then, the bank provides the money needed to fund the deal. And ensuring all details of the exchange are completed and that the title is clear to transfer from the seller to the buyer is the title company.
So, who's responsible for making sure the value of the real estate is in line with the amount being paid? In comes the appraiser. We provide an unbiased estimate of what a buyer could 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 V C Appraisals will ensure, you as an interested party, are informed.
The inspection is where an appraisal starts
Our first duty at V C Appraisals is to inspect the property to determine its true status. We must actually see aspects of the property, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really are present and are in the condition a typical person would expect them to be. To make sure the stated square footage has not been misrepresented and document the layout of the house, the inspection often entails creating a sketch of the floorplan. Most importantly, we identify any obvious features - or defects - that would have an impact on the value of the house.
Back at the office, we use two or three approaches to determining the value of the property: paired sales analysis and, in the case of a rental property, an income approach.
Here, the appraiser gathers information on local building costs, labor rates and other factors to determine how much it would cost to replace the property being appraised. This figure often 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 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 subject at hand. By assigning a dollar value to certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or extra storage space, we adjust the comparable properties so that they are more accurately in line with 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 V C Appraisals, we are experts when it comes to knowing the value of particular items in Oklahoma City and Oklahoma County neighborhoods. The sales comparison approach to value is typically given the most consideration when an appraisal is for a home sale.
Valuation Using the Income Approach
A third way of valuing a property is sometimes employed when an area has a measurable number of renter occupied properties. In this scenario, the amount of revenue the property yields is taken into consideration along with income produced by comparable properties to determine the current value.
Arriving at a Value Conclusion
Examining the data from all approaches, the appraiser is then ready to document an estimated market value for the property in question. It is important to note that while the appraised value is probably the most reliable indication of what a house is worth, it probably will not be the price at which the property closes. There are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust the final price up or down. But the appraised value is often employed 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 V C Appraisals will guarantee you discover the most fair and balanced property value, so you can make the most informed real estate decisions.