Real Estate Appraisals: A PrimerA home purchase is the most significant transaction some people may ever make. It doesn't matter if it's a main residence, a seasonal vacation home or an investment, the purchase of real property is a complex transaction that requires multiple parties to see it through.
The majority of the parties involved are quite familiar. The real estate agent is the most recognizable person in the exchange. Then, the mortgage company provides the financial capital needed to fund the transaction. The title company makes sure that all requirements of the sale are completed and that a clear title transfers to the buyer from the seller.
So what party makes sure the value of the real estate is in line with the purchase price? 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 property, where both buyer and seller are informed parties. A professional Oregon licensed appraiser from Aurora Appraisal Services will ensure you as an interested party are informed.
Appraisals begin with the property inspectionOur first duty at Aurora Appraisal Services is to inspect the property to ascertain its true status. We must actually see aspects of the property, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they truly exist and are in the condition a reasonable person would expect them to be. The inspection often includes a sketch of the floor plan, ensuring the square footage is accurate and conveying the layout of the property. Most importantly, we identify any obvious features - or defects - that would have an impact on the value of the property.
Next, after the inspection, we use two or three approaches when determining the value of the property: sales comparison and, in the case of a rental property, an income approach.
Cost ApproachHere, the appraiser pulls information on local construction costs, labor rates and other factors to figure out how much it would cost to replace the property being appraised. This estimate commonly sets the maximum on what a property would sell for. It's also the least used predictor of value.
Analyzing Comparable SalesAppraisers can tell you a lot about the communities in which they work. We innately understand the value of certain features to the people of that area. Then, the appraiser looks up recent sales in close proximity to the subject and finds properties which are 'comparable' to the home being appraised. By assigning a dollar value to certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or extra 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 method of valuing approach to value is sometimes applied 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 nearby properties to derive the current value.
Arriving at a Value ConclusionAnalyzing the data from all approaches, the appraiser is then ready to put down an estimated market value for the subject property. Note: While the appraised value is probably the most reliable indication of what a property would sell for in an open market, it may not be the final sales price. There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust the final price 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 case they had to put the property on the market again. Here's what it all boils down to: An appraiser from Aurora Appraisal Services will help you attain the most fair and balanced property value, so you can make the most informed real estate decisions.