Understanding the Appraisal ProcessOne's home purchase can be the largest transaction some could ever consider. Whether it's where you raise your family, a second vacation home or one of many rentals, purchasing real property is an involved financial transaction that requires multiple parties to see it through.
Most people are familiar with the parties having a role in the transaction. The real estate agent is the most recognizable face in the exchange. Then, the bank provides the money needed to fund the transaction. Ensuring all requirements of the transaction are completed and that the title is clear to transfer to the buyer from the seller is the title company.
So what party makes sure the real estate 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 Oklahoma licensed appraiser from Hickmon Realty, Inc. will ensure you as an interested party are informed.
Appraisals start with the inspectionOur first duty at Hickmon Realty, Inc. is to inspect the property to determine its true status. We must physically see features, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really are present and are in the shape a typical buyer would expect them to be. To make sure the stated square footage is accurate and document the layout of the house, the inspection often requires creating a sketch of the floor plan. Most importantly, we look for any obvious features - or defects - that would affect the value of the property.
Next, after the inspection, we use two or three approaches when determining the value of real property: sales comparison and, in the case of a rental property, an income approach.
Cost ApproachHere, the appraiser analyzes information on local construction costs, labor rates and other elements to ascertain how much it would cost to construct a property comparable to the one being appraised. This estimate often sets the maximum on what a property would sell for. It's also the least used predictor of value.
Analyzing Comparable SalesAppraisers become very familiar with the communities in which they appraise. We innately understand the value of particular features to the residents of that area. Then, the appraiser researches recent transactions in close proximity to the subject and finds properties which are 'comparable' to the subject at hand. By assigning a dollar value to 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 property.
Valuation Using the Income ApproachA third way of valuing approach to value is sometimes applied when an area has a reasonable number of rental properties. In this situation, the amount of revenue the property produces is taken into consideration along with income produced by nearby 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. It is important to note that while the appraised value is probably the most reliable indication of what a property would sell for in an open market, it probably will not be the price at which the property closes. 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 employed as a guideline for lenders who don't want to loan a buyer more money than they could recover in case they had to put the property on the market again. It all comes down to this: An appraiser from Hickmon Realty, Inc. will guarantee you get the most accurate property value, so you can make the most informed real estate decisions.