Making Sense of the Appraisal Process
Buying real estate can be the biggest transaction some people may ever encounter. Whether it's a main residence, a seasonal vacation home or an investment, the purchase of real property is a complex transaction that requires multiple people working in concert to pull it all off.
Most people are familiar with the parties taking part in the transaction. The most known entity in the transaction is the real estate agent. Next, the lender provides the financial capital needed to bankroll the transaction. And the title company sees to it that all requirements of the exchange are completed and that the title is clear to pass to the buyer from the seller.
So, who makes sure the property is worth the purchase price? In comes the appraiser. We provide an unbiased opinion 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 Appraisals by Kana, LLC will ensure, you as an interested party, are informed.
Appraisals start with the home inspection
To ascertain the true status of the property, it's our responsibility to first complete a thorough inspection. We must see features hands on, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they truly exist and are in the shape a typical 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 amenities - or defects - that would affect the value of the house.
After the inspection, we use 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.
This is where the appraiser analyzes information on local building costs, labor rates and other factors to determine how much it would cost to construct a property comparable 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 method.
Analyzing Comparable Sales
Appraisers can tell you a lot about the subdivisions in which they work. They innately understand the value of specific features to the residents of that area. Then, the appraiser looks up recent transactions in the area and finds properties which are 'comparable' to the real estate at hand. By assigning a dollar value to 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 are more accurately in line with 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 knowing the true worth of features of homes in Lafayette and Lafayette, Appraisals by Kana, LLC is your local authority. The sales comparison approach to value is typically given the most importance when an appraisal is for a home purchase.
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 scenario, the amount of revenue the property yields is factored in with income produced by neighboring properties to derive the current value.
Combining information from all applicable approaches, the appraiser is then ready to state 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 what a property is worth. Depending on the specific situations 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.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 get back in case they had to put the property on the market again. At the end of the day, an appraiser from Appraisals by Kana, LLC will help you discover the most fair and balanced property value, so you can make profitable real estate decisions.