An Overview of the Appraisal Process
Acquiring a house is the largest financial decision some people may ever encounter. It doesn't matter if where you raise your family, a second vacation home or one of many rentals, the purchase of real property is an involved financial transaction that requires multiple parties to see it through.
Most people are familiar with the parties taking part in the transaction. The most familiar person in the transaction is the real estate agent. Then, the bank provides the financial capital required to finance the exchange. And ensuring all details of the exchange are completed and that a clear title passes to the buyer from the seller is the title company.
So, who makes sure the property is worth the purchase price? In comes the appraiser. We provide an unbiased estimate 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 Zenith Appraisal Services will ensure, you as an interested party, are informed.
Appraisals begin with the home inspection
To determine the true status of the property, it's our responsibility to first conduct a thorough inspection. We must see features first hand, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they indeed are present and are in the shape a typical buyer would expect them to be. To make sure the stated size of the property is accurate and document the layout of the house, the inspection often entails creating a sketch of the floorplan. Most importantly, the appraiser looks for any obvious amenities - or defects - that would have an impact on the value of the house.
Following the inspection, an appraiser uses two or three approaches to determining the value of the property: sales comparison and, in the case of a rental property, an income approach.
Here, we analyze information on local construction costs, labor rates and other factors to derive how much it would cost to replace the property being appraised. This figure often sets the upper limit on what a property would sell for. It's also the least used method.
Paired Sales Analysis
Appraisers become very familiar with the communities in which they work. They thoroughly understand the value of specific features to the homeowners of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the subject in question. By assigning a dollar value to 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 portray the features of subject property.
After all differences have been accounted for, 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 putting a value on features of homes in Aurora and Arapahoe, Zenith Appraisal Services can't be beat. The sales comparison approach to value is most often awarded the most importance when an appraisal is for a home purchase.
Valuation Using the Income Approach
A third way of valuing approach to value is sometimes applied when a neighborhood has a measurable number of renter occupied properties. In this situation, the amount of revenue the property produces is factored in with other rents in the area for comparable properties to determine the current value.
Putting It All Together
Examining the data from all approaches, the appraiser is then ready to put down an estimated market value for the property in question. Note: While this amount is probably the most accurate indication of what a house is worth, it may not be the price at which the property closes. It's not uncommon for prices to be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. But the appraised value is typically employed as a guideline for lenders who don't want to loan a buyer more money than they could get back in case they had to put the property on the market again. The bottom line is, an appraiser from Zenith Appraisal Services will help you get the most accurate property value, so you can make profitable real estate decisions.