Understanding the Appraisal ProcessTheir home's purchase is the biggest financial decision many may ever encounter. Whether it's where you raise your family, an additional vacation home or an investment, purchasing real property is a complex financial transaction that requires multiple people working in concert to see it through. Practically all the parties involved are quite familiar. The most known person in the exchange is the real estate agent. Next, the mortgage company provides the financial capital necessary to finance the deal. And ensuring all details 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 property is consistent with the purchase price? In comes the appraiser. We provide an unbiased opinion of what a buyer might expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from DRD Computer Consultants will ensure, you as an interested party, are informed. Inspecting the subject propertyTo determine the true status of the property, it's our duty to first perform a thorough inspection. We must actually view aspects of the property, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they really are present and are in the condition a typical person would expect them to be. To make sure the stated square footage is accurate and document the layout of the property, the inspection often requires creating a sketch of the floorplan. Most importantly, the appraiser looks for any obvious amenities - or defects - that would affect the value of the house. Once the site has been inspected, an appraiser uses two or three approaches to determining the value of real property: paired sales analysis and, in the case of a rental property, an income approach. Cost ApproachThis is where we pull information on local construction costs, the cost of labor and other factors to ascertain how much it would cost to replace the property being appraised. This value often sets the maximum on what a property would sell for. It's also the least used method. Paired Sales AnalysisAppraisers become very familiar with the neighborhoods in which they appraise. They innately understand the value of particular features to the homeowners of that area. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are 'comparable' to the property at hand. 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 adjust the comparable properties so that they more accurately match the features of subject property.
Once all necessary adjustments have been made, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At DRD Computer Consultants, we are experts in knowing the worth of real estate features in Addison and Dallas County neighborhoods. The sales comparison approach to value is commonly given the most consideration when an appraisal is for a home exchange. Valuation Using the Income ApproachA third method of valuing a property is sometimes employed when a neighborhood has a reasonable number of rental properties. In this case, the amount of income the property produces is taken into consideration along with income produced by similar properties to give an indicator of the current value. Arriving at a Value ConclusionAnalyzing the data from all applicable approaches, the appraiser is then ready to document 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 is worth. Depending on the individual circumstances 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.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 is actually worth. It all comes down to this, an appraiser from DRD Computer Consultants will help you discover the most fair and balanced property value, so you can make the most informed real estate decisions. |