What Are the Parts of an Appraisal?
Their home's purchase can be the most important financial decision many will ever consider. It doesn't matter if where you raise your family, an additional vacation home or one of many rentals, the purchase of real property is a detailed financial transaction that requires multiple parties to see it through.
It's likely you are familiar with the parties taking part in the transaction. The most recognizable face in the exchange is the real estate agent. Then, the bank provides the financial capital needed to fund the transaction. And the title company makes sure that all details of the exchange are completed and that a clear title transfers to the buyer from the seller.
So, who makes sure the real estate is worth the amount being paid? This is where the appraiser comes in. 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 Valiant Valuation LLC will ensure, you as an interested party, are informed.
The inspection is where an appraisal starts
Our first task at Valiant Valuation LLC is to inspect the property to determine its true status. We must see aspects of the property hands on, 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 reasonable buyer would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is correct and conveying 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 property.
Next, after the inspection, we use two or three approaches to determining the value of the property: sales comparison and, in the case of a rental property, an income approach.
Here, we analyze 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 estimate usually sets the maximum on what a property would sell for. It's also the least used predictor of value.
Appraisers can tell you a lot about the communities in which they work. They thoroughly understand the value of particular features to the people of that area. Then, the appraiser researches recent sales in the neighborhood and finds properties which are 'comparable' to the subject at hand. Using knowledge of the value of certain items such as square footage, additional bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we add or subtract from each comparable's sales price so that they more accurately portray 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 Valiant Valuation LLC, we are experts in knowing the value of real estate features in Castle Rock and Douglas County neighborhoods. The sales comparison approach to value is typically given the most weight when an appraisal is for a real estate sale.
Valuation Using the Income Approach
A third method of valuing real estate is sometimes applied when an area has a measurable number of renter occupied properties. In this case, the amount of revenue the property produces is factored in with other rents in the area for comparable properties to give an indicator of the current value.
Combining information from all applicable approaches, the appraiser is then ready to document an estimated market value for the property at hand. It is important to note that while this amount is probably the most reliable indication of what a house is worth, it probably will not be the final sales price. Prices can always 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 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 Valiant Valuation LLC will guarantee you discover the most fair and balanced property value, so you can make the most informed real estate decisions.