What Is an Appraisal?
Getting a home is the biggest transaction most people may ever encounter. It doesn't matter if a main residence, a second vacation home or an investment, the purchase of real property is a complex transaction that requires multiple people working in concert to pull it all off.
It's likely you are familiar with the parties taking part in the transaction. The most known entity in the exchange is the real estate agent. Next, the mortgage company provides the financial capital required to finance the deal. The title company makes sure that all requirements of the sale are completed and that a clear title passes from the seller to the buyer.
So, what party makes sure the real estate is worth the purchase price? This is where you meet the appraiser. 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 Integrity Appraisals, LLC will ensure, you as an interested party, are informed.
Appraisals begin with the inspection
Our first duty at Integrity Appraisals, LLC is to inspect the property to determine its true status. We must see features first hand, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly are there and are in the shape a typical person would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is accurate and conveying the layout of the property. Most importantly, we look for any obvious features - or defects - that would have an impact on the value of the property.
Once the site has been inspected, an appraiser uses two or three approaches to determining the value of the property: sales comparison and, in the case of a rental property, an income approach.
This is where the appraiser uses information on local building costs, the cost of labor and other elements to ascertain how much it would cost to build a property similar to the one being appraised. This figure often sets the upper limit on what a property would sell for. The cost approach is also the least used predictor of value.
Appraisers can tell you a lot about the subdivisions in which they appraise. They thoroughly understand the value of specific features to the residents of that area. Then, the appraiser looks up recent transactions in the neighborhood and finds properties which are 'comparable' to the home at hand. By assigning a dollar value to certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or additional storage space, we adjust the comparable properties so that they more accurately portray the features of subject.
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. At Integrity Appraisals, LLC, we are an authority when it comes to knowing the value of real estate features in Edmond and Oklahoma County neighborhoods. This approach to value is most often given the most consideration when an appraisal is for a home purchase.
Valuation Using the Income Approach
A third way of valuing approach to value is sometimes applied when a neighborhood has a reasonable number of renter occupied properties. In this situation, the amount of revenue the property yields is taken into consideration along with other rents in the area for comparable properties to derive the current value.
Arriving at a Value Conclusion
Examining the data from all approaches, the appraiser is then ready to state an estimated market value for the subject property. It is important to note that while this amount is probably the most accurate indication of what a property is worth, it may not be the final sales price. 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 typically employed as a guideline for lenders who don't want to loan a buyer more money than they could recover in the event they had to put the property on the market again. At the end of the day, an appraiser from Integrity Appraisals, LLC will help you get the most fair and balanced property value, so you can make wise real estate decisions.