Home Appraisals: An IntroA home purchase is said to be the most significant investment you'll make in your lifetime. It doesn't matter if it's your starter home, where you raise your family, a second vacation property or one of a portfolio of rentals, the purchase of real property is a detailed transaction that requires multiple parties to make it happen. It's likely you are already familiar with the parties taking part in the transaction. The most familiar face in the transaction is the real estate agent. Then, the mortgage company provides the financial capital required to fund the transaction. The title company sees to it that all requirements of the exchange are completed and that the title is clear to transfer to the buyer from the seller. So how can you be sure the real estate value is consistent with the purchase price? In comes the appraiser. We provide an unbiased opinion of what a buyer might expect to pay - or a seller receive - for a property, where both buyer and seller are motivated and informed. A professional Colorado certified appraiser from 360 Appraisal Inc will ensure you as an interested party are informed. Motivation is up to you. Appraisals start with the Home ObservationOur first responsibility at 360 Appraisal is to inspect the property to ascertain its true status, quality and condition. We prefer to see features first hand, such as the bedrooms and bathrooms, the location, amenities, upgrades and more, to determine the home's placement in the market. To verify the stated size of the property and illustrate the layout of the house, the inspection entails creating a sketch of the floor plan with measurements taken on site. Most importantly, we identify any obvious amenities - or defects such as deferred maintenance - that would likely affect the value of the house.Following the inspection, we use two or three approaches when determining the value of the property: estimated cost to build, paired sales analysis, and, in the case of a rental property, an income approach to value. Replacement/Reproduction CostThis is where the appraiser gathers information on local building costs, the cost of labor and other factors to estimate how much it would likely cost to replace the property being appraised. This estimate usually sets the maximum on what a property would sell for. It's also the least reliable indicator of value, because builder costs and home prices fluctuate independently.Paired Sales AnalysisAppraisers become very familiar with the neighborhoods in which they appraise. We thoroughly understand the value of certain features to the residents of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the home being appraised. Adjustments are assigned to certain items such as square footage, additional bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we adjust the comparable properties so that they more accurately portray the features of subject.
Valuation Using the Income ApproachA third method of valuing approach to value is sometimes used when an area has a sufficient number of income generating rental properties. In this case, the amount of income the real estate yields is factored with income produced by neighboring properties to derive the current value.The Bottom LineAnalyzing the data from all applicable approaches, the appraiser is then ready to document an estimated market value for the property. 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 would sell for in an open market. It's not uncommon for prices to be driven up or down by extenuating circumstances like the urgent needs of a seller, or 'bidding wars' among buyers. Regardless, the appraised value is often employed as a guideline for lenders who need assurances they can recover the loan, if the new owners had to sell the property again. The bottom line is: An appraiser from 360 Appraisal Inc will provide the most fair and balanced property value estimate, so you can make more informed real estate decisions. |