What are the components of an appraisal?Buying a house is the most important transaction many could ever make. Whether it's a main residence, a second vacation property or one of many rentals, the purchase of real property is a detailed financial transaction that requires multiple parties to pull it all off.
Most of the parties involved are quite familiar. The real estate agent is the most recognizable face in the exchange. Next, the mortgage company provides the money required to bankroll the transaction. The title company makes sure that all aspects of the exchange are completed and that the title is clear to transfer to the buyer from the seller.
So what party is responsible for making sure 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 parcel of real estate, where both buyer and seller are informed parties. A professional Oregon licensed appraiser from Cross Appraisal Service will ensure you as an interested party are informed.
Inspecting the subject propertyOur first task at Cross Appraisal Service is to inspect the property to ascertain its true status. We must see features first hand, such as the number of bedrooms and bathrooms, the location, living areas, etc., to ensure they indeed exist and are in the condition a typical buyer would expect them to be. The inspection often includes a sketch of the floor plan, 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 house.
After the inspection, we use two or three approaches when determining the value of the property: paired sales analysis and, in the case of a rental property, an income approach.
Replacement CostHere, the appraiser analyzes information on local building costs, the cost of labor and other factors to determine how much it would cost to construct a property similar to the one being appraised. This value commonly sets the upper limit on what a property would sell for. The cost approach is also the least used method.
Sales ComparisonAppraisers get to know the subdivisions in which they appraise. We thoroughly understand the value of specific features to the people of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the home in question. Using knowledge of the value of certain items such as upgraded appliances, extra 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.
Valuation Using the Income ApproachA third way of valuing approach to value is sometimes used when a neighborhood has a measurable number of renter occupied properties. In this situation, 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 LineCombining information from all approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. 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 Depending on the individual situations of the buyer or seller, their level of urgency or a buyer's desire for that exact property, the closing price of a home can always be driven up or down. Regardless, the appraised value is typically used as a guideline for lenders who don't want to loan a buyer more money than they could recover in the event they had to put the property on the market again. It all comes down to this: An appraiser from Cross Appraisal Service will guarantee you attain the most fair and balanced property value, so you can make profitable real estate decisions.