A Description of the Appraisal Process
Buying real estate can be the most serious financial decision most may ever consider. It doesn't matter if where you raise your family, a seasonal vacation home or a rental fixer upper, the purchase of real property is a detailed financial transaction that requires multiple people working in concert to see it through.
You're probably familiar with the parties taking part in the transaction. The real estate agent is the most familiar face in the transaction. Then, the lender provides the money needed to finance the exchange. And ensuring all details of the sale are completed and that a clear title transfers to the buyer from the seller is the title company.
So, what party makes sure the value of the property is consistent with the purchase price? This is where you meet 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 C L Harper & Associates will ensure, you as an interested party, are informed.
Appraisals start with the home inspection
To determine the true status of the property, it's our duty 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, and so on, to ensure they truly exist and are in the condition 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 property, the inspection often includes creating a sketch of the floorplan. Most importantly, the appraiser looks for any obvious features - or defects - that would affect the value of the house.
Once the site has been inspected, we use two or three approaches to determining the value of real property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.
This is where we gather information on local building costs, labor rates and other elements to calculate how much it would cost to replace the property being appraised. This figure often sets the maximum on what a property would sell for. It's also the least used method.
Analyzing Comparable Sales
Appraisers are intimately familiar with the subdivisions in which they work. They innately understand the value of specific features to the residents 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 more accurately portray 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 C L Harper & Associates, we are an authority when it comes to knowing the worth of particular items in Corpus Christi and Nueces County neighborhoods. The sales comparison approach to value is usually given the most consideration when an appraisal is for a real estate sale.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - the appraiser may use an additional way of valuing a property. In this situation, the amount of revenue the property generates is factored in with income produced by comparable properties to determine the current value.
Coming Up With The Final Value
Analyzing the data from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the property at hand. It is important to note that while the appraised value is probably the best indication of what a house is worth, it probably will not be the final sales price. There are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust an offer or listing price 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 the property is actually worth. At the end of the day, an appraiser from C L Harper & Associates will help you attain the most fair and balanced property value, so you can make wise real estate decisions.