Making Sense of the Appraisal Process
Their home's purchase can be the largest investment most people may ever consider. It doesn't matter if a primary residence, a second vacation property or one of many rentals, the purchase of real property is an involved transaction that requires multiple parties to pull it all off.
Most of the participants are very familiar. The most known person in the transaction is the real estate agent. Then, the mortgage company provides the financial capital necessary to finance the exchange. The title company sees to it that all aspects of the exchange are completed and that a clear title transfers from the seller to the purchaser.
So, who makes sure the value of the real estate is in line 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 parcel of real estate, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Nordquist Appraisal LLC will ensure, you as an interested party, are informed.
Inspecting the subject property
Our first responsibility at Nordquist Appraisal LLC is to inspect the property to determine its true status. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they truly are there and are in the shape a typical person would expect them to be. To make sure the stated size of the property has not been misrepresented and describe the layout of the house, the inspection often includes creating a sketch of the floorplan. Most importantly, we look 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: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.
This is where the appraiser pulls information on local construction costs, the cost of labor and other elements to calculate how much it would cost to replace the property being appraised. This value often sets the upper limit on what a property would sell for. It's also the least used predictor of value.
Paired Sales Analysis
Appraisers get to know the neighborhoods 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 the vicinity and finds properties which are 'comparable' to the subject being appraised. Using knowledge of the value of certain items such as square footage, additional bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we adjust the comparable properties so that they more accurately match the features of subject.
An opinion 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 knowing the true value of features of homes in Pittsburgh and Allegheny, Nordquist Appraisal LLC can't be beat. The sales comparison approach to value is typically awarded the most consideration when an appraisal is for a home exchange.
Valuation Using the Income Approach
A third way of valuing a property is sometimes applied when an area has a reasonable number of rental properties. In this case, the amount of revenue the real estate generates is taken into consideration along with income produced by nearby properties to determine the current value.
The Bottom Line
Combining information from all approaches, the appraiser is then ready to put down an estimated market value for the property in question. 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 what a property is worth. Depending on the specific 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 case they had to sell the property again. At the end of the day, an appraiser from Nordquist Appraisal LLC will help you attain the most accurate property value, so you can make the most informed real estate decisions.
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