An Overview of the Appraisal Process
A home purchase can be the most significant investment most of us may ever consider. It doesn't matter if a primary residence, an additional vacation property or a rental fixer upper, purchasing real property is an involved transaction that requires multiple people working in concert to make it all happen.
Most people are familiar with the parties taking part in the transaction. The most recognizable person in the transaction is the real estate agent. Then, the mortgage company provides the financial capital required to finance the transaction. And the title company sees to it that all areas of the exchange are completed and that a clear title transfers from the seller to the purchaser.
So, what party makes sure the property is worth the amount being paid? In comes the appraiser. We provide an unbiased estimate 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 Bacher Appraisal Services will ensure, you as an interested party, are informed.
The inspection is where an appraisal begins
Our first duty at Bacher Appraisal Services is to inspect the property to ascertain its true status. We must see features hands on, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed exist and are in the condition a reasonable person would expect them to be. To make sure the stated size of the property is accurate and illustrate the layout of the home, the inspection often entails creating a sketch of the floorplan. Most importantly, the appraiser looks for any obvious features - or defects - that would affect the value of the house.
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 pulls information on local construction costs, labor rates and other factors to determine how much it would cost to build a property similar to the one being appraised. This value usually sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.
Paired Sales Analysis
Appraisers can tell you a lot about the subdivisions in which they work. They innately understand the value of specific features to the homeowners of that area. Then, the appraiser researches recent sales in the vicinity and finds properties which are 'comparable' to the property at hand. Using knowledge of the value of certain items such as upgraded appliances, extra bathrooms, additional living area, quality of construction, lot size, we adjust the comparable properties so that they more accurately match the features of subject property.
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. When it comes to associating a value with features of homes in Plainview and the South Plains, Bacher Appraisal Services can't be beat. The sales comparison approach to value is typically awarded 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 - we may use an additional approach to value. In this situation, the amount of income the property generates is factored in with income produced by similar properties to give an indicator of the current value.
The Bottom Line
Combining information from all approaches, the appraiser is then ready to put down 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. Prices can always be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. 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 sell the property again. Here's what it all boils down to, an appraiser from Bacher Appraisal Services will help you discover the most accurate property value, so you can make wise real estate decisions.