What are the components of an appraisal?Acquiring a house is the most significant transaction many might ever make. It doesn't matter if it's a primary residence, an additional vacation home or an investment, the purchase of real property is a detailed transaction that requires multiple people working in concert to make it all happen.
Practically all the participants are quite familiar. The real estate agent is the most recognizable person in the transaction. Next, the lender provides the money required to finance the deal. The title company ensures that all areas of the sale are completed and that a clear title transfers from the seller to the purchaser.
So what party is responsible for making sure the property is consistent with the purchase price? This is where you meet the appraiser. We provide an unbiased estimate 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 professional Pennsylvania licensed appraiser from Appraisal Quest, Inc. will ensure you as an interested party are informed.
Appraisals start with the home inspectionOur first duty at Appraisal Quest, Inc. is to inspect the property to determine its true status. We must see features first hand, such as the number of bedrooms and bathrooms, the location, living areas, etc., to ensure they really exist and are in the condition a typical buyer 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, we identify any obvious features - or defects - that would have an impact on the value of the house.
Following the inspection, we use two or three approaches when determining the value of the property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.
Cost ApproachHere, we gather information on local building costs, the cost of labor and other factors to determine how much it would cost to replace the property being appraised. This figure usually sets the maximum on what a property would sell for. It's also the least used method.
Paired Sales AnalysisAppraisers can tell you a lot about the neighborhoods in which they appraise. We thoroughly understand the value of particular features to the homeowners of that area. Then, the appraiser looks up recent transactions in the vicinity and finds properties which are 'comparable' to the real estate in question. 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 are more accurately in line with the features of subject.
Valuation Using the Income ApproachA third way of valuing a property is sometimes employed when an area has a reasonable number of rental properties. In this scenario, the amount of income the real estate yields is factored in with income produced by comparable properties to determine the current value.
Coming Up With the Final ValueExamining the data 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. It'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 typically employed as a guideline for lenders who don't want to loan a buyer more money than the property would likely sell for in an open marketplace. The bottom line is: An appraiser from Appraisal Quest, Inc. will help you attain the most fair and balanced property value, so you can make wise real estate decisions.