What Are the Parts of an Appraisal?
Acquiring real estate is the most significant investment most of us could ever encounter. Whether it's where you raise your family, a seasonal vacation home or one of many rentals, the purchase of real property is an involved financial transaction that requires multiple parties 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 transaction is the real estate agent. Next, the mortgage company provides the financial capital needed to bankroll the transaction. The title company sees to it that all details of the sale are completed and that the title is clear to pass from the seller to the purchaser.
So, who's responsible for making sure the real estate is worth the amount being paid? In comes the appraiser. We provide an unbiased opinion 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 ORACLE APPRAISALS will ensure, you as an interested party, are informed.
Appraisals begin with the inspection
To determine the true status of the property, it's our duty to first conduct a thorough inspection. We must physically see features, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly are present and are in the condition a reasonable person would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is accurate and illustrating the layout of the property. Most importantly, the appraiser looks for 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.
This is where the appraiser gathers information on local construction costs, labor rates and other elements to figure out how much it would cost to construct a property nearly identical to the one being appraised. This figure usually sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.
Analyzing Comparable Sales
Appraisers are intimately familiar with the subdivisions in which they work. They thoroughly understand the value of certain features to the homeowners of that area. Then, the appraiser researches recent sales in the area and finds properties which are 'comparable' to the subject in question. 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.
An opinion of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. When it comes to putting a value on features of homes in Sisters and Deschutes, ORACLE APPRAISALS is your local authority. This approach to value is usually given the most consideration when an appraisal is for a home exchange.
Valuation Using the Income Approach
A third way of valuing approach to value is sometimes employed when an area has a reasonable number of rental properties. In this case, the amount of revenue the real estate generates is factored in with income produced by similar properties to determine the current value.
Arriving at a Value Conclusion
Combining information from all approaches, the appraiser is then ready to document an estimated market value for the property in question. 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 what a property is worth. There are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust an offer or listing price 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 the property is actually worth. At the end of the day, an appraiser from ORACLE APPRAISALS will help you get the most accurate property value, so you can make the most informed real estate decisions.