Understanding the Appraisal Process
Acquiring a house is the most serious investment some of us could ever make. It doesn't matter if a main residence, a second vacation home or a rental fixer upper, purchasing real property is a detailed financial transaction that requires multiple parties to pull it all off.
The majority of the participants are very familiar. The most known entity in the transaction is the real estate agent. Next, the bank provides the money needed to fund the exchange. And ensuring all details of the sale are completed and that a clear title transfers to the buyer from the seller is the title company.
So, who makes sure the value of the property is consistent with the purchase price? This is where the appraiser comes in. We provide an unbiased opinion of what a buyer might expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from M Davies Appraisal LLC will ensure, you as an interested party, are informed.
Inspecting the subject property
Our first duty at M Davies Appraisal LLC is to inspect the property to determine its true status. We must physically view features, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they truly are present and are in the shape a reasonable person would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is proper and illustrating the layout of the property. Most importantly, the appraiser identifies any obvious features - or defects - that would affect the value of the house.
Back at the office, an appraiser uses two or three approaches to determining the value of the property: paired sales analysis and, in the case of a rental property, an income approach.
Here, we pull information on local building costs, labor rates and other elements to ascertain how much it would cost to replace the property being appraised. This estimate usually sets the maximum on what a property would sell for. It's also the least used predictor of value.
Analyzing Comparable Sales
Appraisers can tell you a lot about the neighborhoods in which they appraise. They innately understand the value of particular features to the homeowners of that area. Then, the appraiser researches recent sales in the vicinity and finds properties which are 'comparable' to the home being appraised. By assigning a dollar value to certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or additional storage space, we add or subtract from each comparable's sales price so that they more accurately match the features of subject property.
Once all necessary adjustments have been made, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. When it comes to valuing features of homes in Steamboat Springs and Routt, M Davies Appraisal LLC is your local authority. This approach to value is most often given the most importance 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 - the appraiser may use an additional way of valuing a property. In this situation, the amount of income the real estate generates is taken into consideration along with income produced by similar properties to derive the current value.
Analyzing the data from all applicable approaches, the appraiser is then ready to document an estimated market value for the subject property. The estimate of value on the appraisal report is not always the final sales price even though it is likely the best indication of a property's valuePrices 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 often employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. The bottom line is, an appraiser from M Davies Appraisal LLC will guarantee you attain the most accurate property value, so you can make wise real estate decisions.
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