What goes into an appraisal?Buying a home is the most significant financial decision many will ever consider. Whether it's where you raise your family, a second vacation property or a rental fixer upper, purchasing real property is a complex financial transaction that requires multiple people working in concert to see it through.
It's likely you are familiar with the parties having a role in the transaction. The real estate agent is the most recognizable person in the transaction. Next, the lender provides the financial capital required to fund the deal. Ensuring all aspects of the transaction are completed and that the title is clear to pass to the buyer from the seller is the title company.
So who makes sure the value of the property is in line with the amount being paid? In comes the appraiser. We provide an unbiased estimate of what a buyer could expect to pay - or a seller receive - for a property, where both buyer and seller are informed parties. A professional Pennsylvania licensed appraiser from JK Appraisals,LLC will ensure you as an interested party are informed.
Inspecting the subject propertyTo ascertain an accurate status of the property, it's our duty to first conduct a thorough inspection. We must physically view aspects of the property, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really are there and are in the condition a typical person would expect them to be. To ensure the stated square footage has not been misrepresented and convey the layout of the property, the inspection often requires creating a sketch of the floor plan. Most importantly, the appraiser identifies any obvious amenities - or defects - that would affect the value of the house.
Once the site has been inspected, an appraiser employs two or three approaches when determining the value of the property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.
Cost ApproachHere, we analyze information on local construction costs, labor rates and other factors to figure out how much it would cost to construct a property comparable to the one being appraised. This estimate often sets the upper limit on what a property would sell for. It's also the least used method.
Sales ComparisonAppraisers become very familiar with the neighborhoods in which they work. We thoroughly understand the value of certain features to the people of that area. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are 'comparable' to the real estate being appraised. By assigning a dollar value to certain items such as fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, we adjust the comparable properties so that they more accurately portray the features of subject.
Valuation Using the Income ApproachA third method of valuing a property is sometimes used when an area has a reasonable number of rental properties. In this scenario, the amount of income the real estate produces is taken into consideration along with other rents in the area for comparable properties to determine the current value.
Coming Up With the Final ValueCombining information from all approaches, the appraiser is then ready to state an estimated market value for the property in question. It is important to note that while the appraised value is probably the most accurate indication of what a house would sell for in an open market, it may not be the price at which the property closes. Depending on the specific circumstances 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 recover in the event they had to sell the property again. At the end of the day: An appraiser from JK Appraisals,LLC will help you discover the most fair and balanced property value, so you can make wise real estate decisions.