Understanding Appraisals

Acquiring a house can be the largest financial decision most people will ever consider. Whether it's a primary residence, a seasonal vacation home or an investment, the purchase of real property is a detailed financial transaction that requires multiple people working in concert to see it through.

It's likely you are familiar with the parties taking part in the transaction. The most recognizable entity in the transaction is the real estate agent. Then, the mortgage company provides the financial capital needed to finance the exchange. And the title company makes sure that all details of the exchange are completed and that the title is clear to transfer to the buyer from the seller.

To learn more about appraising, click here to see a short video or call us today to talk about your specific property.

So, who's responsible for making sure the value of the property is in line with the amount being paid? In comes the appraiser. 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 licensed, certified, professional appraiser from Lukas Rhodes will ensure, you as an interested party, are informed.

The inspection is where an appraisal begins

Our first duty at Lukas Rhodes is to inspect the property to ascertain its true status. We must actually see features, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they truly are there and are in the shape a typical buyer would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is proper and conveying the layout of the property. Most importantly, we look for any obvious amenities - or defects - that would have an impact on the value of the property.

Back at the office, 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.

Replacement Cost

Here, we use information on local building costs, the cost of labor and other elements to calculate how much it would cost to construct a property nearly identical to the one being appraised. This figure commonly sets the maximum on what a property would sell for. It's also the least used predictor of value.

Analyzing Comparable Sales

Appraisers get to know the subdivisions in which they appraise. They innately understand the value of specific features to the people of that area. Then, the appraiser researches recent transactions in the neighborhood and finds properties which are 'comparable' to the home being appraised. Using knowledge of the value of certain items such as square footage, extra 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 more accurately match the features of subject property.

For example, if the comparable has a fireplace and the subject does not, the appraiser may deduct the value of a fireplace from the sales price of the comparable home.
In the case where the subject has something such as an extra half bath that a comparable doesn't have, the appraiser might add the value of that bath to the comparable property.

After all differences have been accounted for, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. When it comes to associating a value with features of homes in McVeytown and Mifflin, Lukas Rhodes can't be beat. This approach to value is most often given the most consideration when an appraisal is for a real estate exchange.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - we may use a third approach to value. In this scenario, the amount of income the real estate yields is taken into consideration along with other rents in the area for comparable properties to determine the current value.

Arriving at a Value Conclusion

Examining the data from all approaches, the appraiser is then ready to stipulate 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. Depending on the individual 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 typically used 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 put the property on the market again. It all comes down to this, an appraiser from Lukas Rhodes will help you discover the most accurate property value, so you can make wise real estate decisions.