A Description of the Appraisal ProcessA home purchase is the most serious transaction most of us could ever encounter. It doesn't matter if it's a primary residence, a seasonal vacation property or a rental fixer upper, the purchase of real property is an involved transaction that requires multiple people working in concert to see it through.
You're probably familiar with the parties having a role in the transaction. The real estate agent is the most familiar entity in the exchange. Next, the bank provides the money needed to bankroll the transaction. The title company ensures that all areas of the exchange are completed and that the title is clear to transfer from the seller to the purchaser.
So what party makes sure the property is consistent with the purchase price? This is where the appraiser comes in. 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 professional Oregon licensed appraiser from The Richards Group, Inc. will ensure you as an interested party are informed.
Appraisals start with the property inspectionOur first responsibility at The Richards Group, Inc. is to inspect the property to ascertain its true status. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they indeed are present and are in the shape a typical buyer would expect them to be. To ensure the stated size of the property is accurate and convey the layout of the property, the inspection often requires creating a sketch of the floor plan. Most importantly, we identify any obvious amenities - 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 the property: paired sales analysis and, in the case of a rental property, an income approach.
Replacement CostHere, we analyze information on local construction costs, labor rates and other elements to derive how much it would cost to build a property similar to the one being appraised. This value often sets the upper limit on what a property would sell for. It's also the least used predictor of value.
Sales ComparisonAppraisers are intimately familiar with the communities in which they appraise. We innately understand the value of particular features to the homeowners of that area. Then, the appraiser researches recent transactions in close proximity to the subject and finds properties which are 'comparable' to the property at hand. Using knowledge of the value of certain items such as square footage, additional bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject property.
Valuation Using the Income ApproachIn the case of income producing properties - rental houses for example - we may use a third approach to value. 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 derive the current value.
Arriving at a Value ConclusionAnalyzing the data from all applicable approaches, the appraiser is then ready to document an estimated market value for the subject property. It is important to note that while the appraised value is probably the strongest indication of what a property would sell for in an open market, it may not be the final sales price. Depending on the specific 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. But the appraised value is often used as a guideline for lenders who don't want to loan a buyer more money than they could recover in case they had to sell the property again. It all comes down to this: An appraiser from The Richards Group, Inc. will guarantee you attain the most accurate property value, so you can make wise real estate decisions.