What goes into an appraisal?Purchasing a home can be the biggest investment some of us could ever make. Whether it's where you raise your family, a seasonal vacation property or an investment, the purchase of real property is a detailed financial transaction that requires multiple people working in concert to pull it all off.
The majority of the parties involved are quite familiar. The most recognizable entity in the transaction is the real estate agent. Then, the mortgage company provides the money required to fund the deal. The title company sees to it that all aspects of the transaction are completed and that the title is clear to pass from the seller to the purchaser.
So what party is responsible for making sure the value of the property is in line with the amount being paid? This is where you meet the appraiser. We provide an unbiased estimate of what a buyer might expect to pay - or a seller receive - for a property, where both buyer and seller are informed parties. A professional Illinois licensed appraiser from Jordan-Appraisal will ensure you as an interested party are informed.
Inspecting the subject propertyTo ascertain an accurate status of the property, it's our duty to first perform a thorough inspection. We must see features hands on, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they indeed are there and are in the condition a typical buyer would expect them to be. To make sure the stated size of the property has not been misrepresented and document the layout of the house, the inspection often entails creating a sketch of the floor plan. Most importantly, the appraiser identifies any obvious amenities - or defects - that would have an impact on the value of the house.
Once the site has been inspected, we use two or three approaches when determining the value of real property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.
Replacement CostHere, we pull information on local building costs, labor rates and other elements to figure out how much it would cost to build a property comparable to the one being appraised. This value usually sets the upper limit on what a property would sell for. It's also the least used method.
Analyzing Comparable SalesAppraisers become very familiar with the subdivisions in which they appraise. We 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 property in question. Using knowledge of the value of certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or extra storage space, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject.
Valuation Using the Income ApproachIn the case of income producing properties - rental houses for example - the appraiser may use an additional approach to value. In this situation, the amount of revenue the property produces is taken into consideration along with other rents in the area for comparable properties to derive the current value.
Arriving at a Value ConclusionCombining information 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 this amount is probably the most reliable indication of what a house would sell for in an open market, it probably will not be the price at which the property closes. Depending on the specific situations 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 recover in the event they had to put the property on the market again. The bottom line is: An appraiser from Jordan-Appraisal will guarantee you attain the most accurate property value, so you can make profitable real estate decisions.