Getting real estate can be the biggest transaction most might ever encounter. It doesn’t matter if it’s where you raise your family, a seasonal vacation property or a rental fixer upper, the purchase of real property is an involved financial transaction that requires multiple parties to make it all happen.
Most of the participants are quite familiar. The most recognizable person in the exchange is the real estate agent. Then, the bank provides the financial capital needed to bankroll the transaction. 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 is responsible for making sure the value of the property is consistent with the purchase price? In comes the appraiser. We provide an unbiased estimate of what a buyer might expect to pay – or a seller receive – for a property, where both buyer and seller are informed parties. A professional Ohio licensed appraiser from Appraisal Keys, Inc will ensure you as an interested party are informed.
The inspection is where an appraisal begins
To ascertain the true status of the property, it’s our duty to first conduct a thorough inspection. We must see features hands on, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they truly are there and are in the shape a reasonable person would expect them to be. To make sure the stated size of the property is accurate and illustrate the layout of the home, the inspection often entails creating a sketch of the floor plan. Most importantly, the appraiser looks for 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 sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.
This is where we gather information on local construction costs, labor rates and other factors to ascertain how much it would cost to replace the property being appraised. This value commonly sets the upper limit on what a property would sell for. The cost approach is also the least used predictor of value.
Appraisers become very familiar with the subdivisions in which they appraise. We innately understand the value of certain features to the homeowners of that area. Then, the appraiser looks up recent transactions in the area and finds properties which are ‘comparable’ to the property at hand. By assigning a dollar value to certain items such as upgraded appliances, additional bathrooms, an additional living area, quality of construction, lot size, we adjust the comparable properties so that they are more accurately in line with the features of subject.
- Say, for example, the comparable has a fireplace and the subject does not, the appraiser may subtract the value of a fireplace from the sales price of the comparable.
- If the subject has an extra half-bathroom and the comparable does not, the appraiser might add an amount to the comparable property.
At Appraisal Keys, Inc, we are an authority in knowing the value of real estate features in Cleveland and Cuyahoga County neighborhoods. The sales comparison approach to value is commonly given the most importance when an appraisal is for a home exchange.
Valuation Using the Income Approach
A third way of valuing a house is sometimes applied when a neighborhood has a reasonable number of rental properties. In this scenario, the amount of income the real estate generates is taken into consideration along with income produced by neighboring properties to determine the current value.
Combining information from all approaches, the appraiser is then ready to stipulate an estimated market value for the subject 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 could sell for in an open market. There 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. But 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 Appraisal Keys, Inc will help you get the most accurate property value, so you can make profitable real estate decisions.