What is an appraisal?A home purchase can be the biggest transaction many might ever encounter. Whether it's where you raise your family, a second vacation property or a rental fixer upper, purchasing real property is an involved financial transaction that requires multiple parties to pull it all off.
The majority of the parties involved are very familiar. The real estate agent is the most recognizable face in the transaction. Then, the lender provides the money necessary to finance the exchange. The title company makes sure that all aspects of the sale are completed and that the title is clear to pass from the seller to the buyer.
So who makes sure the real estate is consistent with the purchase price? This is where you meet the appraiser. We provide an unbiased estimate 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 Ohio licensed appraiser from DS Real Estate Consulting, Inc. will ensure you as an interested party are informed.
Appraisals begin with the inspectionOur first duty at DS Real Estate Consulting, Inc. is to inspect the property to ascertain its true status. We must see features hands on, such as the number of bedrooms and bathrooms, the location, living areas, etc., to ensure they indeed are present and are in the shape a reasonable person would expect them to be. The inspection often includes a sketch of the floor plan, ensuring the square footage is accurate and conveying the layout of the property. Most importantly, the appraiser identifies any obvious features - or defects - that would have an impact on the value of the property.
Following the inspection, an appraiser employs two or three approaches when determining the value of real property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.
Replacement CostHere, we gather information on local construction costs, labor rates and other elements to derive how much it would cost to build a property similar to the one being appraised. This estimate often sets the maximum on what a property would sell for. It's also the least used method.
Analyzing Comparable SalesAppraisers become very familiar with the neighborhoods in which they appraise. We thoroughly understand the value of certain features to the homeowners of that area. Then, the appraiser researches recent transactions in close proximity to the subject and finds properties which are 'comparable' to the subject being appraised. Using knowledge of the value of certain items such as upgraded appliances, additional bathrooms, an additional living area, quality of construction, lot size, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject property.
Valuation Using the Income ApproachIn the case of income producing properties - rental houses for example - we may use an additional way of valuing a house. In this scenario, the amount of income the real estate produces is taken into consideration along with income produced by comparable properties to determine the current value.
Coming Up With the Final ValueAnalyzing the data from all applicable approaches, the appraiser is then ready to put down an estimated market value for the property at hand. The estimate of value on the appraisal report is not always what's being paid for the property even though it is likely the best indication of a property's market value Prices can always be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. Regardless, the appraised value is typically used 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. Here's what it all boils down to: An appraiser from DS Real Estate Consulting, Inc. will guarantee you attain the most accurate property value, so you can make profitable real estate decisions.