Home Appraisals: A Primer
Purchasing a house can be the most important transaction most might ever encounter. It doesn't matter if where you raise your family, an additional vacation home or an investment, the purchase of real property is a complex financial 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 exchange is the real estate agent. Then, the mortgage company provides the money necessary to finance the deal. The title company sees to it that all requirements of the exchange are completed and that a clear title passes to the buyer from the seller.
So, who's responsible for making sure the value of the real estate is in line with the purchase price? In comes the appraiser. We provide an unbiased estimate of what a buyer could 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 Flint Hills Appraisals will ensure, you as an interested party, are informed.
Appraisals begin with the property inspection
Our first task at Flint Hills Appraisals is to inspect the property to determine its true status. We must see features hands on, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they truly exist and are in the condition a typical person would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is accurate and conveying the layout of the property. Most importantly, we identify any obvious features - or defects - that would have an impact on the value of the house.
Next, after the inspection, an appraiser uses two or three approaches to determining the value of real property: paired sales analysis and, in the case of a rental property, an income approach.
This is where the appraiser uses information on local construction costs, the cost of labor and other factors to ascertain how much it would cost to replace the property being appraised. This figure usually sets the maximum on what a property would sell for. It's also the least used predictor of value.
Analyzing Comparable Sales
Appraisers get to know the subdivisions in which they work. They innately understand the value of specific features to the people of that area. Then, the appraiser looks up recent transactions in the neighborhood and finds properties which are 'comparable' to the real estate being appraised. By assigning a dollar value to certain items such as square footage, additional bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we adjust the comparable properties so that they are more accurately in line with the features of subject property.
A valid estimate of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. At Flint Hills Appraisals, we are an authority when it comes to knowing the worth of particular items in Manhattan and Riley County neighborhoods. This approach to value is most often awarded the most consideration when an appraisal is for a real estate sale.
Valuation Using the Income Approach
A third method of valuing a property is sometimes applied when an area has a reasonable number of renter occupied properties. In this situation, the amount of income the property generates is taken into consideration along with other rents in the area for comparable properties to determine the current value.
Putting It All Together
Analyzing 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 on the appraisal report is not necessarily the final sales price even though it is likely the best indication of a property's valueDepending on the individual circumstances 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.Regardless, the appraised value is often used as a guideline for lenders who don't want to loan a buyer more money than they could get back in the event they had to sell the property again. At the end of the day, an appraiser from Flint Hills Appraisals will help you discover the most fair and balanced property value, so you can make the most informed real estate decisions.