What goes into an appraisal?A home purchase is the largest investment some people could ever make. Whether it's a primary residence, a second vacation property or one of many rentals, purchasing real property is a detailed transaction that requires multiple people working in concert 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 lender provides the money required to fund the deal. The title company makes sure that all requirements of the exchange are completed and that a clear title transfers to the buyer from the seller.
So who makes sure the value of the property is consistent with the purchase price? This is where the appraiser comes in. 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 professional Pennsylvania licensed appraiser from Pine Hill Realty will ensure you as an interested party are informed.
Appraisals start with the property inspectionOur first task at Pine Hill Realty is to inspect the property to ascertain 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 truly are there and are in the condition a typical buyer would expect them to be. The inspection often includes a sketch of the floor plan, ensuring the square footage is correct and conveying 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, we use two or three approaches when determining the value of real property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.
Replacement CostThis is where the appraiser analyzes information on local construction costs, the cost of labor and other factors to figure out how much it would cost to replace the property being appraised. This figure commonly sets the upper limit on what a property would sell for. It's also the least used predictor of value.
Paired Sales AnalysisAppraisers can tell you a lot about the neighborhoods in which they appraise. We innately understand the value of certain features to the homeowners of that area. Then, the appraiser researches recent transactions in close proximity to the subject and finds properties which are 'comparable' to the property being appraised. By assigning a dollar value to certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or additional storage space, we adjust the comparable properties so that they more accurately portray the features of subject.
Valuation Using the Income ApproachIn the case of income producing properties - rental houses for example - we may use a third method of valuing real estate. In this case, the amount of revenue the real estate generates is factored in with other rents in the area for comparable properties to determine the current value.
Putting It All TogetherCombining 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 the final sales price even though it is likely the best indication of what a property could sell for in an open market. Prices can always 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. At the end of the day: An appraiser from Pine Hill Realty will help you discover the most fair and balanced property value, so you can make wise real estate decisions.