A Description of the Appraisal ProcessOne's home purchase can be the most serious investment most will ever make. Whether it's where you raise your family, a second vacation property or one of many rentals, purchasing real property is an involved transaction that requires multiple people working in concert to make it all happen.
Practically all the participants are quite familiar. The most known person in the transaction is the real estate agent. Next, the lender provides the money needed to fund the deal. Ensuring all areas of the exchange are completed and that a clear title passes to the buyer from the seller is the title company.
So who's responsible for making sure the property is consistent with the amount being paid? This is where you meet the appraiser. We provide an unbiased opinion of what a buyer could expect to pay - or a seller receive - for a parcel of real estate, where both buyer and seller are informed parties. A professional Connecticut licensed appraiser from Tradition Appraisal Group will ensure you as an interested party are informed.
Appraisals begin with the home inspectionTo determine an accurate status of the property, it's our duty to first perform a thorough inspection. We must actually see features, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed exist and are in the shape a reasonable person would expect them to be. To ensure the stated square footage is accurate and illustrate the layout of the home, the inspection often entails creating a sketch of the floor plan. Most importantly, the appraiser looks for any obvious features - or defects - that would have an impact on the value of the house.
Following the inspection, an appraiser employs 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, the appraiser pulls information on local building costs, the cost of labor and other factors to ascertain how much it would cost to construct a property nearly identical to the one being appraised. This figure commonly sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.
Paired Sales AnalysisAppraisers become very familiar with the subdivisions in which they work. We innately understand the value of specific features to the residents of that area. Then, the appraiser looks up recent sales in the area and finds properties which are 'comparable' to the property being appraised. By assigning a dollar value to certain items such as upgraded appliances, extra bathrooms, an additional living area, quality of construction, lot size, we adjust the comparable properties so that they more accurately match the features of subject property.
Valuation Using the Income ApproachA third method of valuing a house is sometimes employed when a neighborhood has a reasonable number of rental properties. In this scenario, the amount of income the property yields is factored in with other rents in the area for comparable properties to determine the current value.
Arriving at a Value ConclusionCombining information from all applicable approaches, the appraiser is then ready to document an estimated market value for the subject property. Note: While this amount is probably the strongest 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 individual 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 often used as a guideline for lenders who don't want to loan a buyer more money than they could get back in the event they had to sell the property again. The bottom line is: An appraiser from Tradition Appraisal Group will help you discover the most fair and balanced property value, so you can make wise real estate decisions.