Real Property Appraisals: A PrimerA home purchase can be the most serious transaction many people might ever make. It doesn't matter if it's a main residence, an additional vacation property or a rental fixer upper, purchasing real property is a complex transaction that requires multiple people working in concert to see it through.
It's likely you are familiar with the parties taking part in the transaction. The most known face in the exchange is the real estate agent. Next, the mortgage company provides the money required to fund the transaction. Ensuring all requirements of the sale are completed and that a clear title passes from the seller to the buyer is the title company.
So what party is responsible for making sure the property is consistent with the amount being paid? This is where the appraiser comes in. 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 professional Pennsylvania licensed appraiser from Bohem Associates will ensure you as an interested party are informed.
Inspecting the subject propertyTo determine the true status of the property, it's our responsibility to first perform a thorough inspection. We must see features hands on, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed are there and are in the shape a reasonable person would expect them to be. To ensure the stated square footage has not been misrepresented and document the layout of the home, the inspection often requires creating a sketch of the floor plan. Most importantly, we identify any obvious amenities - or defects - that would have an impact on the value of the house.
Next, after the inspection, we use two or three approaches when determining the value of the property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.
Replacement CostThis is where the appraiser gathers information on local construction costs, labor rates and other factors to derive how much it would cost to construct a property comparable to the one being appraised. This value commonly sets the upper limit on what a property would sell for. The cost approach is also the least used predictor of value.
Analyzing Comparable SalesAppraisers get to know the neighborhoods in which they work. We thoroughly understand the value of certain features to the people of that area. Then, the appraiser looks up recent transactions in the vicinity and finds properties which are 'comparable' to the home at hand. Using knowledge of the value of certain items such as upgraded appliances, extra bathrooms, an additional living area, quality of construction, lot size, we add or subtract from each comparable's sales price so that they more accurately portray the features of subject.
Valuation Using the Income ApproachA third way of valuing real estate is sometimes employed when a neighborhood has a measurable number of rental properties. In this situation, the amount of revenue the property generates is factored in with income produced by neighboring properties to give an indicator of the current value.
ReconciliationAnalyzing the data from all applicable approaches, the appraiser is then ready to document an estimated market value for the property in question. The estimate of value at the bottom of the appraisal report is not always the final sales price even though it is likely the best indication of a property's market value There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust the final price 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 would likely sell for in an open marketplace. The bottom line is: An appraiser from Bohem Associates will help you attain the most accurate property value, so you can make wise real estate decisions.