Breaking Down the the Appraisal ProcessGetting a house is the most serious transaction many people could ever encounter. Whether it's a primary residence, a seasonal vacation home or a rental fixer upper, the purchase of real property is a complex 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 most familiar face in the transaction is the real estate agent. Then, the bank provides the money needed to finance the exchange. Ensuring all details of the sale are completed and that a clear title passes to the buyer from the seller is the title company.
So who makes sure the value of the property is consistent with the purchase price? 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 Wisconsin licensed appraiser from Lifestyle Tax & Appraisal LLC will ensure you as an interested party are informed.
The inspection is where an appraisal startsTo ascertain an accurate status of the property, it's our responsibility to first perform a thorough inspection. We must physically see features, such as the number of bedrooms and bathrooms, the location, living areas, etc., to ensure they indeed are present and are in the condition a reasonable buyer would expect them to be. The inspection often includes a sketch of the floor plan, ensuring the square footage is proper and illustrating the layout of the property. Most importantly, the appraiser identifies any obvious features - or defects - that would have an impact on the value of the house.
Following the inspection, an appraiser employs two or three approaches when determining the value of real property: sales comparison and, in the case of a rental property, an income approach.
Replacement CostHere, the appraiser gathers information on local building costs, the cost of labor and other elements to ascertain how much it would cost to replace the property being appraised. This value commonly sets the upper limit on what a property would sell for. The cost approach is also the least used predictor of value.
Sales ComparisonAppraisers can tell you a lot about the communities in which they appraise. We thoroughly understand the value of particular features to the homeowners of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the subject being appraised. By assigning a dollar value to certain items such as square footage, additional bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we adjust the comparable properties so that they more accurately match the features of subject.
Valuation Using the Income ApproachA third method of valuing real estate is sometimes employed when an area has a reasonable number of rental properties. In this scenario, the amount of revenue the property yields is factored in with other rents in the area for comparable properties to derive the current value.
The Bottom Line
Combining information from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the property in question. It is important to note that while the appraised value is probably the best indication of what a property would sell for in an open market, it probably will not be the final sales price. Depending on the individual 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 employed as a guideline for lenders who don't want to loan a buyer more money than the property would likely sell for in an open marketplace. It all comes down to this: An appraiser from Lifestyle Tax & Appraisal LLC will guarantee you get the most fair and balanced property value, so you can make the most informed real estate decisions.
Some nice tips to expedite your appraisal from Lifestyle Tax & Appraisal LLC
To make your appraisal process go as smoothly as possible we generally recommend to have these documents, if available, ready for the appraiser:
When the appraiser has arrived, you do not need to escort them along on the entire site inspection, but it's helpful be available to answer questions about your property and be willing to point out any home improvements.
Here are a few other helpful recommendations: