WHAT IS AN APPRAISAL?
An appraisal is an unbiased opinion of value and professional appraisers are here to provide that service as well as protect the public trust.
In most cases an appraisal is needed in connection with a home purchase, which is the largest single investment most people will ever make.
Whether it is a primary residence, a second home, or an investment property, the purchase of real property is a complex financial transaction with the participation of multiple parties to pull it all off, the appraiser being one of them. Our function is to be the independent and unbiased professional that interprets the value of a property and what a typical person would pay for the property.Most industry professionals are very familiar with the transaction process. The Realtor, assisting buyers and sellers in the sale of a property, is the most common face of the transaction. The mortgage company provides the financial capital necessary to fund the transaction and to assess their risk in the loan. The title company ensures that a clear title passes from the seller to the buyer. Each party stands to gain financially in the process. All but the independent appraiser.
There are too many people working on commission in the process to let such a transaction proceed without ensuring that the value of the property is on par with the amount being paid. Who makes sure the value of the value of the property is comparable with the amount being paid? The appraiser. Additionally, appraisers are the only people authorized to determine the value of the property. Others can “estimate” what the value is (think the bank, realtors, Zillow, etc.) but only a licensed appraiser can determine the actual value of a property.
An appraisal is 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. To be an “informed party”, most people turn to a licensed professional appraiser to provide them with the most accurate and true value of the property.
Keep in mind, appraisers DO NOT set market value, they interpret market value and report the results of the market.
Appraisers have extensive education, experience researching market data, and understanding the nuances of the local market so they can properly gauge value. This experience takes years to obtain and becoming a fully licensed state appraiser takes years as well. The average appraiser has a at least some college or a degree and has apprenticed under another licensed appraiser for 1-3 years before they can obtain their license. It then takes additional time to really be familiar with markets that we service. Something to keep in mind is that according to our founding principles, and mandated by Congress, appraisers must be geographically competent to appraise in the market they cover. In other words, it takes a long time to fully understand the market that any appraiser works in.
Inspection
An appraisal starts with the inspection. An appraiser’s duty is to inspect the subject property to determine the true status of that property. In most cases the appraiser must physically see features, such as the overall size, number of bedrooms, bathrooms, location, and so on, to ensure that they exist and are in the condition a reasonable person would expect them to be in. In most cases the inspection includes a sketch of the property to ensure the proper square footage and layout of the property are recorded. 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, an appraiser uses one, two, or three approaches to determining the value of real property: a cost approach, a sales comparison, or, in the case of an investment / rental property, an income approach.
Sales Comparison Approach
In most cases, appraisers rely on the sales comparison approach to value the subject property. Appraisers get to know the neighborhoods and markets in which they work. They understand the value of certain features to the residents of that area. They study the traffic patterns, the school zones, amenities, the busy throughways, etc.; and they use this information to determine which attributes of a property will make a difference in the value. Then, after the site inspection, the appraiser researches recent sales in the vicinity and finds properties which are ”comparable” to the subject being appraised. Comparable properties are what a similar buyer would consider when looking in that particular market. The sales prices of these properties are used as a basis to begin the sales comparison approach.
Cost Approach
The cost approach is the easiest to understand. The appraiser uses information on local building costs, labor rates, and other factors to determine how much it would cost to construct a property similar to the property. Included in this approach is the value of the land, any onsite improvements, and estimated depreciation if the home isn’t new. In a healthy market, this cost value often is equivalent to what the property would sell for. Why would you pay more for an existing property if you could spend less and build a brand-new home instead? When the cost approach is lower than the sales comparison approach it tends to suggest the market has inflated values and when the cost approach is lower than the sales comparison approach is tends to suggest the market is somewhat depressed. This method is used by insurance companies to determine a home’s replacement (insured) value, but is not accepted by most lenders and is not generally considered to be the market value of a property.
Income Approach
In the case of income producing properties – rental houses for example – the appraiser may use a third approach to valuing the property. In this case, the amount of income the property produces is used to arrive at the current value of those revenues over the foreseeable future. This approach is only used for income generating investment properties and that income can sometimes be used to quality for a loan.
Reconciliation
Combining information from all approaches developed, the appraiser is then be ready to determine an estimated market value for the subject property. It is important to note that while this amount is probably the best indication of what a property is worth, it may not be the final sales price. 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 determining what a property is actually worth and it might not be in line with what someone offered and another accepted. The bottom line is: an appraiser will help you get the most accurate property value so you can make the most informed real estate decisions.
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Client Testimonials
“Worth Every Dollar was outstanding to work with. They did a great job explaining the process before it began and explaining the results. The report was very professional and very well documented and explained. They also offered many suggestions/comments to my questions. Overall, great experience.”
“These days it seems that we ‘expect’ things to not be perfect…
and it is such a pleasant surprise when things not only go well, but beyond your expectations.
Worth Every Dollar Appraisal’s fits this description perfectly.”
“This company was quick to return my call even in the midst of them relocating their office. They sent an appraiser out at a time that was convenient for me and my appraisal was completed with the same efficiency and customer service that I received from the first phone call.”
“The appraisal was fast and easy. I initiated contact and he immediately too the time to explain to me my option to ensure I was getting what I needed and at the best price. Once I was sure, I called him back and made the appointment which ended up being just a few days later, so no longer wait (that’s a plus).”
“It takes a lot to name your business something like worth every dollar, but the live up to their name. From the first contact, through the process, and follow up questions, they are top notch professional and knowledgeable, moreover with a great understanding of industry related issues.”
“I learned much more than I expected.
Of course I came away knowing a reasonable value of the home, but I also learned about the market in which I will be selling it. If you need to sell a home, please get an appraisal from this company!”