Decoding the Appraisal Process
A home purchase is the most serious financial decision most people may ever consider. Whether it's a main residence, an additional vacation property or a rental fixer upper, purchasing real property is an involved transaction that requires multiple parties to make it all happen.
The majority of the participants are quite familiar. The real estate agent is the most familiar entity in the transaction. Next, the bank provides the money necessary to finance the exchange. And ensuring all requirements of the exchange are completed and that a clear title transfers to the buyer from the seller is the title company.
So, what party is responsible for making sure the value of the real estate is consistent with the purchase price? This is where you meet the appraiser. We provide an unbiased opinion of what a buyer could expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Dohoney Appraisal will ensure, you as an interested party, are informed.
Inspecting the subject property
Our first responsibility at Dohoney Appraisal is to inspect the property to ascertain its true status. We must actually view aspects of the property, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really are present and are in the shape a typical buyer would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is proper and illustrating the layout of the property. Most importantly, the appraiser looks for any obvious amenities - or defects - that would affect the value of the house.
Next, after the inspection, an appraiser uses two or three approaches to determining the value of the property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.
Here, we analyze information on local building costs, labor rates and other factors to ascertain how much it would cost to replace the property being appraised. This figure usually sets the maximum on what a property would sell for. It's also the least used method.
Paired Sales Analysis
Appraisers can tell you a lot about the subdivisions in which they work. They thoroughly understand the value of specific 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. 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 adjust the comparable properties so that they are more accurately in line with the features of subject property.
In the end, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. When it comes to valuing features of homes in Dallas and Dallas, Dohoney Appraisal is your local authority. The sales comparison approach to value is most often given the most consideration when an appraisal is for a home sale.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - we may use a third way of valuing a property. In this case, the amount of revenue the property yields is factored in with other rents in the area for comparable properties to determine the current value.
The Bottom Line
Analyzing the data from all approaches, the appraiser is then ready to stipulate an estimated market value for the property in question. The estimate of value on the appraisal report is not always the final sales price even though it is likely the best indication of a property's valueThere are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust the final price up or down. Regardless, the appraised value is often used as a guideline for lenders who don't want to loan a buyer more money than they could recover in case they had to sell the property again. Here's what it all boils down to, an appraiser from Dohoney Appraisal will guarantee you discover the most fair and balanced property value, so you can make wise real estate decisions.