What Goes Into an Appraisal?
A home purchase is the most significant transaction most could ever make. It doesn't matter if a main residence, a second vacation home or an investment, the purchase of real property is a detailed financial transaction that requires multiple people working in concert to pull it all off.
Practically all the participants are very familiar. The most familiar entity in the transaction is the real estate agent. Next, the bank provides the money required to bankroll the transaction. And ensuring all areas of the transaction are completed and that a clear title passes to the buyer from the seller is the title company.
So, what party makes sure the value of the real estate is consistent with the amount being paid? This is where the appraiser comes in. 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 licensed, certified, professional appraiser from Salt Lake Appraising Company will ensure, you as an interested party, are informed.
Inspecting the subject property
Our first task at Salt Lake Appraising Company is to inspect the property to ascertain its true status. We must physically see features, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they really are present and are in the shape a typical person would expect them to be. To make sure the stated square footage has not been misrepresented and illustrate the layout of the home, the inspection often entails creating a sketch of the floorplan. Most importantly, we look for any obvious amenities - or defects - that would affect the value of the property.
Following the inspection, we use two or three approaches to determining the value of the property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.
Here, we analyze information on local construction costs, the cost of labor and other factors to figure out how much it would cost to construct a property comparable to the one being appraised. This figure usually sets the maximum on what a property would sell for. It's also the least used method.
Paired Sales Analysis
Appraisers get to know the neighborhoods in which they work. They thoroughly understand the value of certain features to the residents of that area. Then, the appraiser researches recent sales in the area and finds properties which are 'comparable' to the subject in question. By assigning a dollar value to certain items such as upgraded appliances, additional bathrooms, additional living area, quality of construction, lot size, we adjust the comparable properties so that they more accurately match the features of subject.
In the end, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At Salt Lake Appraising Company, we are experts when it comes to knowing the value of particular items in Draper and Salt Lake County neighborhoods. This approach to value is most often awarded the most weight when an appraisal is for a home sale.
Valuation Using the Income Approach
A third way of valuing real estate is sometimes used when an area has a reasonable number of rental properties. In this situation, the amount of income the real estate generates is taken into consideration along with income produced by neighboring properties to derive the current value.
Arriving at a Value Conclusion
Combining information from all applicable approaches, the appraiser is then ready to state an estimated market value for the property in question. The estimate of value on the appraisal report is not necessarily the final sales price even though it is likely the best indication of a property's valueThere are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust an offer or listing price 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 the property is actually worth. It all comes down to this, an appraiser from Salt Lake Appraising Company will guarantee you discover the most accurate property value, so you can make profitable real estate decisions.