What Goes Into an Appraisal?
Getting a home is the biggest financial decision many will ever make. It doesn't matter if a main residence, an additional vacation property or an investment, the purchase of real property is a detailed transaction that requires multiple people working in concert to see it through.
The majority of the people involved are quite familiar. The most recognizable person in the exchange is the real estate agent. Next, the bank provides the financial capital required to fund the transaction. And ensuring all areas of the transaction are completed and that the title is clear to transfer to the buyer from the seller is the title company.
So, who makes sure the real estate is worth the amount being paid? 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 Zenith Appraisal Services will ensure, you as an interested party, are informed.
Appraisals begin with the property inspection
To ascertain an accurate status of the property, it's our responsibility to first conduct a thorough inspection. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they indeed are there and are in the condition a reasonable buyer would expect them to be. To make sure the stated square footage is accurate and convey the layout of the home, the inspection often requires creating a sketch of the floorplan. Most importantly, we look for any obvious amenities - or defects - that would have an impact on the value of the house.
Back at the office, an appraiser uses two or three approaches to determining the value of real property: sales comparison and, in the case of a rental property, an income approach.
Here, we use information on local construction costs, the cost of labor and other elements to derive how much it would cost to replace the property being appraised. This estimate usually sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.
Analyzing Comparable Sales
Appraisers become very familiar with the subdivisions in which they work. They thoroughly understand the value of particular features to the homeowners of that area. Then, the appraiser researches recent sales in the vicinity and finds properties which are 'comparable' to the subject in question. Using knowledge of the value of certain items such as upgraded appliances, additional bathrooms, additional living area, quality of construction, lot size, we adjust the comparable properties so that they more accurately match the features of subject.
A true estimate 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 worth of features of homes in Aurora and Arapahoe, Zenith Appraisal Services can't be beat. This approach to value is usually awarded the most consideration when an appraisal is for a real estate exchange.
Valuation Using the Income Approach
A third way of valuing real estate is sometimes used when an area has a measurable number of renter occupied properties. In this case, the amount of revenue the real estate yields is factored in with other rents in the area for comparable properties to give an indicator of the current value.
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 at the bottom of the appraisal report is not necessarily the final sales price even though it is likely the best indication of a property's valueThere are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust the final price up or down. Regardless, the appraised value is typically employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. Here's what it all boils down to, an appraiser from Zenith Appraisal Services will guarantee you attain the most fair and balanced property value, so you can make the most informed real estate decisions.