Understanding Appraisals

Their home's purchase can be the biggest transaction most people might ever consider. It doesn't matter if where you raise your family, an additional vacation home or one of many rentals, purchasing real property is an involved transaction that requires multiple parties to make it all happen.

Most of the people involved are very familiar. The real estate agent is the most familiar entity in the transaction. Next, the bank provides the financial capital required to bankroll the transaction. And ensuring all requirements of the sale are completed and that the title is clear to transfer to the buyer from the seller is the title company.

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So, who makes sure the value of the real estate is in line 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 property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Richard Barker Real Estate will ensure, you as an interested party, are informed.

Inspecting the subject property

Our first task at Richard Barker Real Estate is to inspect the property to determine its true status. We must actually see aspects of the property, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed are present and are in the shape a typical buyer would expect them to be. To make sure the stated square footage is accurate and convey the layout of the property, the inspection often entails creating a sketch of the floorplan. Most importantly, the appraiser looks for any obvious amenities - or defects - that would affect the value of the property.

Next, after the inspection, an appraiser uses two or three approaches to determining the value of the property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.

Cost Approach

Here, the appraiser gathers information on local building costs, labor rates and other factors to figure out how much it would cost to build a property comparable to the one being appraised. This figure usually sets the maximum on what a property would sell for. It's also the least used predictor of value.

Sales Comparison

Appraisers become very familiar with the subdivisions in which they appraise. They innately understand the value of specific features to the homeowners of that area. Then, the appraiser researches recent sales in the area and finds properties which are 'comparable' to the subject at hand. By assigning a dollar value to certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or additional storage space, we add or subtract from each comparable's sales price so that they more accurately portray the features of subject.

For example, if the comparable property has a fireplace and the subject does not, the appraiser may subtract the value of a fireplace from the sales price of the comparable.
However, 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.

A true estimate of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. At Richard Barker Real Estate, we are an authority when it comes to knowing the value of real estate features in North Kingstown and Washington County neighborhoods. The sales comparison approach to value is most often awarded the most weight when an appraisal is for a real estate sale.

Valuation Using the Income Approach

A third method of valuing a property is sometimes employed when a neighborhood has a reasonable number of rental properties. In this case, the amount of income the real estate yields is factored in with other rents in the area for comparable properties to determine the current value.

Reconciliation

Combining information from all applicable approaches, the appraiser is then ready to state an estimated market value for the property in question. It is important to note that while this amount is probably the strongest indication of what a house is worth, it probably will not be the final sales price. 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.But the appraised value is often employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. The bottom line is, an appraiser from Richard Barker Real Estate will help you discover the most fair and balanced property value, so you can make profitable real estate decisions.