Understanding the Appraisal ProcessAcquiring a home is the largest investment most people will ever make. Whether it's a main residence, a seasonal vacation property or an investment, purchasing real property is a detailed financial transaction that requires multiple people working in concert to see it through.
It's likely you are familiar with the parties taking part in the transaction. The real estate agent is the most known person in the exchange. Next, the bank provides the financial capital necessary to bankroll the exchange. Ensuring all details of the transaction are completed and that a clear title passes from the seller to the purchaser is the title company.
So who's responsible for making sure the value of the property is consistent with the purchase price? This is where the appraiser comes in. We provide an unbiased opinion 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 Oklahoma licensed appraiser from Gentry Appraisal Service,Inc. will ensure you as an interested party are informed.
Appraisals begin with the property inspectionOur first responsibility at Gentry Appraisal Service,Inc. is to inspect the property to ascertain its true status. We must physically see aspects of the property, such as the number of bedrooms and bathrooms, the location, living areas, etc., to ensure they truly are present and are in the shape a typical person would expect them to be. To ensure the stated square footage has not been misrepresented and illustrate the layout of the house, the inspection often entails creating a sketch of the floor plan. Most importantly, the appraiser identifies any obvious features - or defects - that would have an impact on the value of the property.
After the inspection, an appraiser employs two or three approaches when determining the value of real property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.
Replacement CostHere, we gather information on local building costs, the cost of labor and other factors to derive how much it would cost to replace the property being appraised. This value usually sets the maximum on what a property would sell for. It's also the least used method.
Paired Sales AnalysisAppraisers are intimately familiar with the communities in which they work. We thoroughly understand the value of particular features to the people of that area. Then, the appraiser researches recent sales in the vicinity and finds properties which are 'comparable' to the home in question. Using knowledge of the value of certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or extra storage space, we adjust the comparable properties so that they are more accurately in line with the features of subject.
Valuation Using the Income ApproachA third method of valuing a property is sometimes employed when an area has a reasonable number of rental properties. In this situation, the amount of income the real estate produces is taken into consideration along with income produced by similar properties to give an indicator of the current value.
ReconciliationCombining information from all approaches, the appraiser is then ready to put down 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 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. The bottom line is: An appraiser from Gentry Appraisal Service,Inc. will guarantee you get the most fair and balanced property value, so you can make the most informed real estate decisions.