Making Sense of the Appraisal Process
A home purchase is the most serious transaction many of us may ever make. Whether it's a primary residence, a second vacation home or an investment, purchasing real property is an involved financial transaction that requires multiple parties to make it all happen.
Most people are familiar with the parties taking part in the transaction. The most known entity in the exchange is the real estate agent. Then, the lender provides the financial capital required to finance the transaction. The title company sees to it that all details of the exchange are completed and that the title is clear to transfer from the seller to the purchaser.
So, what party is responsible for making sure the value of the property is consistent 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 property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Jacob M. Fenn Appraisal Company will ensure, you as an interested party, are informed.
Inspecting the subject property
Our first duty at Jacob M. Fenn Appraisal Company is to inspect the property to determine its true status. We must actually see aspects of the property, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really exist and are in the shape a typical person would expect them to be. To ensure the stated size of the property has not been misrepresented and describe the layout of the house, the inspection often requires creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious features - or defects - that would affect the value of the house.
Following the inspection, we use two or three approaches to determining the value of the property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.
Here, the appraiser gathers information on local construction costs, labor rates and other elements to ascertain how much it would cost to replace the property being appraised. This estimate often sets the upper limit on what a property would sell for. It's also the least used method.
Appraisers can tell you a lot about the communities in which they work. They innately understand the value of certain features to the people of that area. Then, the appraiser researches recent transactions in the area and finds properties which are 'comparable' to the property at hand. 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 are more accurately in line with the features of subject property.
A valid estimate of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. When it comes to valuing features of homes in Gainesville and Alachua, Jacob M. Fenn Appraisal Company is your local authority. This approach to value is usually given the most consideration when an appraisal is for a real estate exchange.
Valuation Using the Income Approach
A third method of valuing a house is sometimes used when a neighborhood has a reasonable number of renter occupied properties. In this scenario, the amount of revenue the real estate produces is factored in with other rents in the area for comparable properties to give an indicator of the current value.
Coming Up With The Final Value
Analyzing the data from all applicable approaches, the appraiser is then ready to document an estimated market value for the property in question. Note: While this amount is probably the most reliable 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 an offer or listing price up or down. Regardless, the appraised value is often employed 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. It all comes down to this, an appraiser from Jacob M. Fenn Appraisal Company will guarantee you discover the most fair and balanced property value, so you can make profitable real estate decisions.