Acquiring a home is the largest financial decision most of us may ever encounter. Whether it's where you raise your family, a seasonal vacation home or an investment, purchasing real property is a detailed transaction that requires multiple parties to make it all happen.
It's likely you are familiar with the parties taking part in the transaction. The most familiar face in the transaction is the real estate agent. Next, the mortgage company provides the financial capital necessary to bankroll the exchange. And ensuring all requirements of the transaction are completed and that a clear title transfers to the buyer from the seller is the title company.
So, who makes sure the value of the property is in line 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 parcel of real estate, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Watson Appraisal Services, Inc will ensure, you as an interested party, are informed.
Inspecting the subject property
Our first duty at Watson Appraisal Services, Inc is to inspect the property to determine 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 really are there and are in the condition a reasonable buyer would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is proper and conveying the layout of the property. Most importantly, we look for any obvious features - or defects - that would affect the value of the property.
Back at the office, an appraiser uses two or three approaches to 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 the appraiser gathers information on local building costs, the cost of labor and other factors to determine how much it would cost to build a property comparable to the one being appraised. This value usually sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.
Analyzing Comparable Sales
Appraisers get to know the neighborhoods in which they appraise. They thoroughly understand the value of certain features to the people of that area. Then, the appraiser researches recent transactions in close proximity to the subject and finds properties which are 'comparable' to the real estate being appraised. 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 add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject property.
A true estimate of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. When it comes to valuing features of homes in Raleigh and Wake, Watson Appraisal Services, Inc is your local authority. The sales comparison approach to value is most often given the most weight when an appraisal is for a real estate sale.
Valuation Using the Income Approach
A third way of valuing a property is sometimes used when an area has a reasonable number of renter occupied properties. In this scenario, the amount of income the real estate yields is factored in with other rents in the area for comparable properties to derive the current value.
Putting It All Together
Analyzing the data from all applicable approaches, the appraiser is then ready to document an estimated market value for the property at hand. 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 is worth. 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'. 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 get back in case they had to put the property on the market again. At the end of the day, an appraiser from Watson Appraisal Services, Inc will help you attain the most accurate property value, so you can make profitable real estate decisions.