A Description of the Appraisal Process
Getting a home can be the biggest financial decision some will ever consider. Whether it's where you raise your family, a seasonal vacation home or one of many rentals, the purchase of real property is an involved financial transaction that requires multiple people working in concert to see it through.
You're probably familiar with the parties taking part in the transaction. The real estate agent is the most known entity in the exchange. Next, the bank provides the financial capital necessary to bankroll the transaction. The title company ensures that all aspects of the exchange are completed and that the title is clear to pass to the buyer from the seller.
So, what party makes sure the property is worth the purchase price? This is where you meet 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 South Shore Appraisals will ensure, you as an interested party, are informed.
Inspecting the subject property
To determine the true status of the property, it's our duty to first perform a thorough inspection. We must physically see aspects of the property, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really are present and are in the shape a reasonable buyer would expect them to be. To ensure the stated square footage has not been misrepresented and document the layout of the property, the inspection often requires creating a sketch of the floorplan. Most importantly, we look for any obvious features - 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 to determining the value of the property: sales comparison and, in the case of a rental property, an income approach.
Here, the appraiser uses information on local building costs, the cost of labor and other factors to calculate how much it would cost to construct a property comparable to the one being appraised. This estimate commonly sets the upper limit on what a property would sell for. It's also the least used method.
Analyzing Comparable Sales
Appraisers can tell you a lot about the subdivisions in which they work. They innately understand the value of specific features to the residents of that area. Then, the appraiser looks up recent transactions in the area and finds properties which are 'comparable' to the home at hand. Using knowledge of the value of certain items such as upgraded appliances, additional bathrooms, additional living area, quality of construction, lot size, we adjust the comparable properties so that they more accurately match the features of subject property.
In the end, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At South Shore Appraisals, we are experts when it comes to knowing the worth of particular items in Schererville and Lake County neighborhoods. The sales comparison approach to value is usually given the most consideration when an appraisal is for a home exchange.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - we may use an additional approach to value. In this case, the amount of revenue the property generates is factored in with other rents in the area for comparable properties to derive the current value.
Coming Up With The Final Value
Combining information from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. The estimate of value on the appraisal report is not always what's being paid for the property even though it is likely the best indication of a property's valueThere 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 used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. It all comes down to this, an appraiser from South Shore Appraisals will guarantee you attain the most accurate property value, so you can make the most informed real estate decisions.