What Is an Appraisal?
A home purchase can be the largest investment some might ever consider. It doesn't matter if where you raise your family, a second vacation home or a rental fixer upper, the purchase of real property is a complex transaction that requires multiple people working in concert to pull it all off.
You're likely to be familiar with the parties taking part in the transaction. The most known entity in the exchange is the real estate agent. Next, the mortgage company provides the money required to finance the exchange. And ensuring all aspects 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 value of the property is in line with the purchase price? This is where you meet the appraiser. We provide an unbiased estimate of what a buyer might expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from REID E. CHOATE & ASSOCIATES, LLC will ensure, you as an interested party, are informed.
Inspecting the subject property
Our first duty at REID E. CHOATE & ASSOCIATES, LLC is to inspect the property to determine its true status. We must physically view features, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they indeed exist and are in the condition a typical person would expect them to be. To ensure the stated size of the property is accurate and describe the layout of the house, the inspection often requires creating a sketch of the floorplan. Most importantly, the appraiser looks for any obvious amenities - or defects - that would affect the value of the house.
Back at the office, we use two or three approaches to determining the value of the property: sales comparison and, in the case of a rental property, an income approach.
This is where the appraiser gathers 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 estimate usually sets the maximum on what a property would sell for. It's also the least used method.
Analyzing Comparable Sales
Appraisers become very familiar with the subdivisions in which they appraise. They thoroughly understand the value of specific features to the people of that area. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are 'comparable' to the real estate in question. By assigning a dollar value to certain items such as square footage, extra bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we adjust the comparable properties so that they more accurately match 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 valuing features of homes in Pahoa and Hawaii, REID E. CHOATE & ASSOCIATES, LLC can't be beat. The sales comparison approach to value is usually awarded the most importance when an appraisal is for a real estate purchase.
Valuation Using the Income Approach
A third method of valuing a house is sometimes used when an area has a measurable number of rental properties. In this case, the amount of income the property generates is taken into consideration along with income produced by neighboring properties to determine the current value.
Putting It All Together
Combining information from all applicable approaches, the appraiser is then ready to state an estimated market value for the property in question. Note: While the appraised value is probably the best indication of what a house is worth, it probably will not be the price at which the property closes. Depending on the individual situations 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 employed 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 REID E. CHOATE & ASSOCIATES, LLC will help you get the most fair and balanced property value, so you can make the most informed real estate decisions.
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