Home Appraisals: A Primer

Getting real estate is the most significant transaction most people will ever consider. It doesn't matter if it's where you raise your family, an additional vacation home or a rental fixer upper, the purchase of real property is a complex financial transaction that requires multiple parties to see it through.


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It's likely you are familiar with the parties having a role in the transaction. The real estate agent is the most recognizable person in the exchange. Next, the mortgage company provides the money necessary to fund the deal. The title company ensures that all areas of the exchange are completed and that a clear title transfers to the buyer from the seller.

So who makes sure the value of the property is in line with the purchase price? This is where the appraiser comes in. 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 professional Oklahoma licensed appraiser from MAXWELL APPRAISAL SERVICE will ensure you as an interested party are informed.

Appraisals begin with the inspection

To determine an accurate status of the property, it's our responsibility to first perform a thorough inspection. We must see features first hand, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly exist and are in the shape a typical person would expect them to be. The inspection often includes a sketch of the floor plan, ensuring the square footage is correct and illustrating the layout of the property. Most importantly, we look for any obvious features - or defects - that would have an impact on the value of the property.

Following the inspection, we use two or three approaches when determining the value of the property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.

Cost Approach

This is where we analyze information on local construction costs, labor rates and other elements to determine how much it would cost to replace the property being appraised. This estimate often sets the upper limit on what a property would sell for. It's also the least used method.

Sales Comparison

Appraisers can tell you a lot about the communities in which they work. We innately understand the value of certain features to the homeowners of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the property in question. By assigning a dollar value to certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or additional 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.

For example, if the comparable property has a fireplace and the subject does not, the appraiser may subtract the value of a fireplace from the sales price of the comparable home.
However, if the subject property has an extra half-bathroom and the comparable does not, the appraiser might add an amount to the comparable property.

When it comes to valuing features of homes in Ada and Pontotoc, MAXWELL APPRAISAL SERVICE is second to none. This approach to value is typically awarded the most weight when an appraisal is for a real estate purchase.

Valuation Using the Income Approach

A third method of valuing a house is sometimes applied when a neighborhood has a reasonable number of rental properties. In this case, the amount of income the property yields is taken into consideration along with income produced by similar properties to derive the current value.

Reconciliation

Combining information from all approaches, the appraiser is then ready to state 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 could sell for in an open market. Prices can always 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 the property would likely sell for in an open marketplace. At the end of the day: An appraiser from MAXWELL APPRAISAL SERVICE will guarantee you get the most fair and balanced property value, so you can make profitable real estate decisions.