An Overview of the Appraisal Process
Getting real estate can be the biggest financial decision most may ever encounter. Whether it's where you raise your family, an additional vacation home or an investment, the purchase of real property is a complex transaction that requires multiple parties to see it through.
Practically all the participants are very familiar. The real estate agent is the most known entity in the transaction. Next, the lender provides the financial capital required to finance the exchange. And the title company sees to it that all details 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 property is worth 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 Appraisals by Kana, LLC will ensure, you as an interested party, are informed.
The inspection is where an appraisal starts
Our first responsibility at Appraisals by Kana, LLC is to inspect the property to determine its true status. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they indeed exist and are in the shape a typical buyer would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is correct and illustrating the layout of the property. Most importantly, we look for any obvious amenities - or defects - that would affect the value of the house.
Back at the office, 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.
This is where we analyze 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 usually sets the upper limit on what a property would sell for. The cost approach is also the least used predictor of value.
Appraisers can tell you a lot about the subdivisions in which they appraise. They thoroughly understand the value of specific features to the homeowners of that area. Then, the appraiser researches recent transactions in the vicinity and finds properties which are 'comparable' to the subject being appraised. By assigning a dollar value to certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or extra storage space, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject.
In the end, 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 Lafayette and Lafayette, Appraisals by Kana, LLC is second to none. The sales comparison approach to value is most often awarded the most weight when an appraisal is for a home exchange.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - we may use an additional approach to value. In this scenario, the amount of revenue the real estate generates is factored in with other rents in the area for comparable properties to give an indicator of the current value.
The Bottom Line
Combining information from all approaches, the appraiser is then ready to state 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 a property's valueDepending on the specific 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 often used 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 Appraisals by Kana, LLC will guarantee you attain the most fair and balanced property value, so you can make profitable real estate decisions.