Home Appraisals: A Primer
A home purchase can be the most important investment some might ever make. Whether it's a main residence, a second vacation home or a rental fixer upper, the purchase of real property is an involved financial transaction that requires multiple people working in concert to make it all happen.
Most people are familiar with the parties taking part in the transaction. The real estate agent is the most recognizable person in the transaction. Next, the lender provides the financial capital necessary to bankroll the exchange. And ensuring all aspects of the transaction are completed and that a clear title transfers to the buyer from the seller is the title company.
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 property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Coker Appraisers, Inc. will ensure, you as an interested party, are informed.
Appraisals begin with the property inspection
To ascertain an accurate status of the property, it's our responsibility to first complete a thorough inspection. We must physically see features, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they indeed are present and are in the condition a typical person would expect them to be. To make sure the stated size of the property has not been misrepresented and illustrate the layout of the property, the inspection often requires creating a sketch of the floorplan. Most importantly, we look for any obvious amenities - or defects - that would have an impact on the value of the property.
Following 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.
This is where the appraiser gathers information on local building costs, the cost of labor and other elements to figure out how much it would cost to construct a property nearly identical to the one being appraised. This value usually sets the upper limit on what a property would sell for. The cost approach is also the least used predictor of value.
Analyzing Comparable Sales
Appraisers become very familiar with the subdivisions in which they work. They innately understand the value of specific features to the residents of that area. Then, the appraiser researches 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 Coker Appraisers, Inc., we are experts when it comes to knowing the value of particular items in Orange and Hardin County neighborhoods. This approach to value is most often awarded the most consideration when an appraisal is for a real estate purchase.
Valuation Using the Income Approach
A third way of valuing a property is sometimes employed when a neighborhood has a measurable number of rental properties. In this case, the amount of revenue the property yields is taken into consideration along with income produced by comparable properties to give an indicator of the current value.
Combining information from all approaches, the appraiser is then ready to stipulate an estimated market value for the property at hand. The estimate of value at the bottom of the appraisal report is not necessarily what's being paid for the property even though it is likely the best indication of a property's valueIt'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 often used 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 sell the property again. It all comes down to this, an appraiser from Coker Appraisers, Inc. will guarantee you discover the most fair and balanced property value, so you can make wise real estate decisions.