What Is an Appraisal?
Getting a home is the largest financial decision many of us might ever encounter. It doesn't matter if a primary residence, a second vacation property or a rental fixer upper, purchasing real property is a detailed financial transaction that requires multiple parties to see it through.
Practically all the participants are quite familiar. The real estate agent is the most familiar person in the exchange. Next, the mortgage company provides the financial capital needed to bankroll the exchange. The title company ensures that all areas of the sale are completed and that the title is clear to pass to the buyer from the seller.
So, what party is responsible for making sure the property is worth the purchase price? This is where the appraiser comes in. We provide an unbiased opinion 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 V C Appraisals will ensure, you as an interested party, are informed.
The inspection is where an appraisal starts
To ascertain 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 indeed are there and are in the condition a typical person would expect them to be. To ensure the stated size of the property has not been misrepresented and describe 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 real property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.
Here, the appraiser pulls information on local construction costs, the cost of labor and other elements to figure out how much it would cost to replace the property being appraised. This figure often sets the upper limit on what a property would sell for. It's also the least used predictor of value.
Appraisers get to know the communities in which they appraise. They thoroughly understand the value of specific features to the homeowners of that area. Then, the appraiser looks up recent transactions in the neighborhood and finds properties which are 'comparable' to the real estate in question. By assigning a dollar value to certain items such as upgraded appliances, additional bathrooms, additional living area, quality of construction, lot size, we adjust the comparable properties so that they are more accurately in line with the features of subject property.
An opinion of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. At V C Appraisals, we are an authority in knowing the value of real estate features in Oklahoma City and Oklahoma County neighborhoods. This approach to value is typically awarded the most importance when an appraisal is for a home exchange.
Valuation Using the Income Approach
A third way of valuing real estate is sometimes used when an area has a measurable number of renter occupied properties. In this situation, the amount of revenue the property produces is factored in with income produced by neighboring properties to determine the current value.
The Bottom Line
Examining the data from all applicable 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 necessarily the final sales price even though it is likely the best indication of what a property is worth. Depending on the specific circumstances of the buyer or seller, their level of urgency or a buyer's desire for that exact property, the closing price of a home can always be driven up or down.But 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 sell the property again. Here's what it all boils down to, an appraiser from V C Appraisals will help you attain the most accurate property value, so you can make wise real estate decisions.