A Description of the Appraisal ProcessA home purchase can be the most important investment some people might ever encounter. It doesn't matter if it's where you raise your family, a seasonal vacation home or a rental fixer upper, purchasing real property is a complex transaction that requires multiple people working in concert to make it all happen.
Most of the parties involved are very familiar. The most known person in the exchange is the real estate agent. Then, the mortgage company provides the money necessary to finance the transaction. The title company sees to it that all aspects of the transaction are completed and that a clear title passes from the seller to the purchaser.
So what party is responsible for making sure the real estate is consistent with the amount being paid? In comes 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 Missouri licensed appraiser from Citiwide Appraisal will ensure you as an interested party are informed.
Appraisals begin with the home inspectionTo ascertain the true status of the property, it's our responsibility to first complete a thorough inspection. We must actually view features, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they indeed are present and are in the condition a typical buyer would expect them to be. To make sure the stated square footage has not been misrepresented and illustrate the layout of the property, the inspection often includes creating a sketch of the floor plan. Most importantly, we identify any obvious features - or defects - that would affect the value of the property.
After the inspection, 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, the appraiser uses information on local building costs, the cost of labor and other elements to derive how much it would cost to replace the property being appraised. This value often sets the upper limit on what a property would sell for. It's also the least used method.
Analyzing Comparable SalesAppraisers can tell you a lot about the communities in which they appraise. We thoroughly understand the value of particular features to the people of that area. Then, the appraiser looks up recent sales in the neighborhood and finds properties which are 'comparable' to the subject being appraised. Using knowledge of the value of 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 more accurately portray the features of subject property.
Valuation Using the Income ApproachA third method of valuing a house is sometimes employed when an area has a reasonable number of rental properties. In this case, the amount of income the property yields is taken into consideration along with income produced by similar properties to determine the current value.
ReconciliationCombining information from all applicable approaches, the appraiser is then ready to document 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 what a property could sell for in an open market. 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 often 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. It all comes down to this: An appraiser from Citiwide Appraisal will guarantee you discover the most fair and balanced property value, so you can make the most informed real estate decisions.