The Appraisal Process
One’s home purchase can be the most important investment most could ever consider. Whether it’s a main residence, an additional vacation property or an investment, the purchase of real property is an involved transaction that requires multiple parties to see it through.
The majority of the participants are quite familiar. The real estate agent is the most known entity in the exchange. Then, the lender provides the financial capital required to fund the transaction. Ensuring all aspects of the sale are completed and that the title is clear to transfer from the seller to the purchaser is the title company.
So who’s responsible for making sure the value of the real estate is consistent with the amount being paid? 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 parcel of real estate, where both buyer and seller are informed parties. A professional Idaho licensed appraiser from Thornycroft Appraisals will ensure you as an interested party are informed.
Appraisals begin with the home inspection
To ascertain an accurate status of the property, it’s our responsibility to first conduct a thorough inspection. We must physically view aspects of the property, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly exist and are in the condition a reasonable person would expect them to be. The inspection often includes a sketch of the floor plan, ensuring the square footage is proper and illustrating the layout of the property. Most importantly, the appraiser looks for any obvious amenities – or defects – that would affect the value of the house.
Back at the office, an appraiser employs two or three approaches when determining the value of real property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.
Cost Approach
Here, the appraiser pulls information on local construction costs, labor rates and other elements to figure out how much it would cost to replace the property being appraised. This estimate usually sets the upper limit on what a property would sell for. The cost approach is also the least used method.
Analyzing Comparable Sales
Appraisers are intimately familiar with the neighborhoods in which they work. We innately 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 subject at hand. Using knowledge of the value of certain items such as upgraded appliances, additional bathrooms, an additional living area, quality of construction, lot size, we adjust the comparable properties so that they more accurately portray the features of subject.
- Say, for example, the comparable has a fireplace and the subject does not, the appraiser may subtract the value of a fireplace from the sales price of the comparable.
- However, if the subject property has an extra half-bathroom and the comparable does not, the appraiser might add an amount to the comparable property.
At Thornycroft Appraisals, we are experts in knowing the value of real estate features in Moscow and Latah County neighborhoods. The sales comparison approach to value is most often awarded the most weight when an appraisal is for a home sale.
Valuation Using the Income Approach
A third way of valuing real estate is sometimes applied when a neighborhood has a reasonable number of renter occupied properties. In this scenario, the amount of income the real estate yields is factored in with other rents in the area for comparable properties to derive the current value.
The Bottom Line
Examining the data from all approaches, the appraiser is then ready to state an estimated market value for the subject property. 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 a property’s market value There are always mitigating factors such as seller motivation, urgency or ‘bidding wars’ that may adjust the final price up or down. Regardless, 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 case they had to put the property on the market again. Here’s what it all boils down to: An appraiser from Thornycroft Appraisals will help you attain the most accurate property value, so you can make wise real estate decisions.