What Goes Into an Appraisal?
Their home's purchase can be the biggest investment some of us might ever consider. Whether it's a main residence, a second vacation home or an investment, purchasing real property is a detailed transaction that requires multiple parties to see it through.
The majority of the people involved are very familiar. The most recognizable entity in the exchange is the real estate agent. Next, the bank provides the financial capital required to fund the transaction. The title company ensures that all aspects of the sale are completed and that the title is clear to pass from the seller to the buyer.
So, what party is responsible for making sure the value of the real estate is consistent with the amount being paid? In comes the appraiser. We provide an unbiased opinion of what a buyer could 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 J P Stein & Associates will ensure, you as an interested party, are informed.
Appraisals start with the home inspection
To determine the true status of the property, it's our duty to first conduct a thorough inspection. We must actually see features, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they really are there and are in the condition a reasonable person would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is accurate and illustrating the layout of the property. Most importantly, the appraiser looks for any obvious features - or defects - that would affect the value of the property.
Once the site has been inspected, we use two or three approaches to determining the value of real property: paired sales analysis and, in the case of a rental property, an income approach.
This is where the appraiser gathers information on local building costs, labor rates and other factors to derive how much it would cost to construct a property similar to the one being appraised. This value often 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 get to know the communities in which they appraise. They thoroughly understand the value of certain features to the people of that area. Then, the appraiser researches recent sales in the area and finds properties which are 'comparable' to the real estate in question. Using knowledge of the value of certain items such as square footage, extra bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we adjust the comparable properties so that they more accurately match the features of subject.
A true estimate of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. When it comes to associating a value with features of homes in Pocatello and Bannock, J P Stein & Associates is second to none. This approach to value is typically awarded the most consideration when an appraisal is for a real estate exchange.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - we may use an additional way of valuing a house. In this situation, the amount of income the real estate produces is taken into consideration along with other rents in the area for comparable properties to give an indicator of the current value.
Arriving at a Value Conclusion
Examining the data from all approaches, the appraiser is then ready to document an estimated market value for the property at hand. Note: While this amount is probably the most reliable indication of what a house is worth, it probably will not be the final sales price. It's not uncommon for prices to 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 employed 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 J P Stein & Associates will guarantee you discover the most fair and balanced property value, so you can make the most informed real estate decisions.