What Is an Appraisal?
Their home's purchase is the most serious financial decision most of us may ever encounter. Whether it's where you raise your family, a second vacation home or a rental fixer upper, the purchase of real property is a detailed transaction that requires multiple parties to see it through.
Practically all the participants are very familiar. The most familiar person in the transaction is the real estate agent. Next, the lender provides the money necessary to fund the exchange. The title company makes sure that all areas of the sale are completed and that a clear title passes to the buyer from the seller.
So, what party 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 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 Slater Real Estate Services will ensure, you as an interested party, are informed.
The inspection is where an appraisal starts
Our first task at Slater Real Estate Services is to inspect the property to determine 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 really are there and are in the condition a typical person would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is correct and conveying the layout of the property. Most importantly, we identify any obvious amenities - or defects - that would affect the value of the property.
Next, after the inspection, 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.
Here, we pull information on local construction costs, labor rates and other elements to derive how much it would cost to build a property nearly identical to the one being appraised. This estimate usually sets the upper limit on what a property would sell for. It's also the least used method.
Appraisers get to know the subdivisions in which they work. They thoroughly understand the value of certain features to the homeowners of that area. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are 'comparable' to the subject at hand. By assigning a dollar value to 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 are more accurately in line with 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. At Slater Real Estate Services, we are experts when it comes to knowing the worth of real estate features in Windsor and Weld County neighborhoods. The sales comparison approach to value is most often awarded the most importance when an appraisal is for a home sale.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - the appraiser may use a third approach to value. In this situation, the amount of revenue the property generates is taken into consideration along with other rents in the area for comparable properties to give an indicator of the current value.
Coming Up With The Final Value
Combining information from all approaches, the appraiser is then ready to document an estimated market value for the property at hand. The estimate of value on the appraisal report is not necessarily the final sales price even though it is likely the best indication of a property's valueThere are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust an offer or listing price up or down. Regardless, 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. It all comes down to this, an appraiser from Slater Real Estate Services will guarantee you discover the most accurate property value, so you can make the most informed real estate decisions.