What Goes Into an Appraisal?
A home purchase can be the most significant transaction some people might ever make. Whether it's a primary residence, a seasonal vacation property or one of many rentals, the purchase of real property is an involved financial transaction that requires multiple people working in concert to see it through.
Practically all the people involved are very familiar. The real estate agent is the most known face in the transaction. Next, the lender provides the financial capital necessary to bankroll the transaction. And ensuring all details of the sale are completed and that the title is clear to pass from the seller to the buyer is the title company.
So, who's responsible for making sure the value of the property 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 property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Petersen Appraising, Inc will ensure, you as an interested party, are informed.
Appraisals start with the property inspection
Our first responsibility at Petersen Appraising, Inc is to inspect the property to ascertain its true status. We must physically see aspects of the property, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they really are present and are in the condition a typical buyer would expect them to be. To ensure the stated square footage is accurate and convey the layout of the house, the inspection often includes creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious amenities - or defects - that would affect the value of the house.
Once the site has been inspected, we use two or three approaches to determining the value of the property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.
This is where the appraiser uses information on local building costs, the cost of labor and other elements to calculate 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 predictor of value.
Analyzing Comparable Sales
Appraisers get to know the communities in which they work. They innately understand the value of particular features to the residents of that area. Then, the appraiser researches recent transactions in the area and finds properties which are 'comparable' to the real estate at hand. Using knowledge of the value of certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or additional storage space, we add or subtract from each comparable's sales price so that they are more accurately in line with 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 Petersen Appraising, Inc, we are an authority in knowing the worth of particular items in Spanish Fork and Utah County neighborhoods. The sales comparison approach to value is most often awarded the most importance when an appraisal is for a home purchase.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - the appraiser may use an additional way of valuing a house. In this situation, the amount of revenue the real estate generates is taken into consideration along with other rents in the area for comparable properties to derive the current value.
Coming Up With The Final Value
Combining information from all approaches, the appraiser is then ready to stipulate an estimated market value for the property at hand. Note: While the appraised value is probably the best indication of what a property is worth, it may not be the price at which the property closes. There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust the final price up or down. Regardless, the appraised value is typically 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 Petersen Appraising, Inc will guarantee you get the most fair and balanced property value, so you can make wise real estate decisions.