Real Estate Appraisals: A PrimerGetting real estate is the most significant transaction some people might ever consider. It doesn't matter if it's where you raise your family, a seasonal vacation home or one of many rentals, purchasing real property is a complex financial transaction that requires multiple parties to pull it all off.
Most people are familiar with the parties taking part in the transaction. The real estate agent is the most known person in the exchange. Next, the mortgage company provides the money necessary to finance the transaction. Ensuring all details of the exchange are completed and that the title is clear to transfer from the seller to the buyer is the title company.
So what party makes sure the real estate is consistent with the amount being paid? In comes 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 Oklahoma Cerfified Appraiser from Rocky Osborn Appraisals will ensure you as an interested party are informed.
Appraisals begin with the inspectionOur first duty at Rocky Osborn Appraisals is to inspect the property. We must determine certain aspects of the property, such as the number of bedrooms and bathrooms, the location, etc. to ensure they exist and are in the shape a typical person would expect them to be. To ensure the stated square footage has not been misrepresented and describe the layout of the house, the inspection often requires creating a sketch of the floor plan. Most importantly, we look for any obvious amenities - or defects - that would affect the value of the property.
Back at the office, we use 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, we gather information on local construction costs, the cost of labor and other elements to figure out how much it would cost to construct a property similar to the one being appraised. This figure commonly sets the maximum on what a property would sell for. It's also the least used predictor of value.
Analyzing Comparable SalesAppraisers become very familiar with the neighborhoods in which they appraise. We thoroughly understand the value of specific 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 in question. By assigning a dollar value to certain items such as square footage, extra bathrooms, hardwood floors, fireplaces or lot views, we adjust the comparable properties so that they are more accurately in line with the 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. The sales comparison approach to value is commonly given the most consideration for a residential property.
Valuation Using the Income ApproachIn the case of income producing properties - rental houses for example - the appraiser may use an additional method of valuing a house. In this case, the amount of income the property yields is factored in with income produced by similar properties to derive the current value.
Arriving at a Value ConclusionExamining the data from all approaches, the appraiser is then ready to put down an estimated market value for the subject property. The estimate of value on 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. Depending on the individual circumstances 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. But the appraised value is typically used as a guideline for lenders who don't want to loan a buyer more money than they could recover in the event they had to put the property on the market again. It all comes down to this: An appraiser from Rocky Osborn Appraisals. will help you attain the most accurate property value, so you can make the most informed real estate decisions.