Real Property Appraisal: A primer
So you made the decision to build the home you have always wanted. This is a big step into a new journey. Building a home can lead to many pitfalls at almost every step of the way. The best way to avoid these problems when it comes to your appraisal is to find the right people to help you sail through the process.
In the case of a new build, the parties involved are well acquainted. The real estate broker plays an important role in guiding the buyer through the process. The bank provides the monetary capital necessary to fund the deal. The title company makes sure that all elements of the deal have been fulfilled and ensures that the title is clear for transfer.
Which team member plays the role of making sure that the purchase price and appraised property value are consistent? This is the job of the appraiser. An appraiser gives the buyer and seller an unbiased valuation of what you can expect to pay and what the seller will receive for the new property. Both parties are privy to the appraisal information. An expert team member at our certified appraising group will work to keep you in the loop and up to speed.
INSPECTING THE SUBJECT PROPERTY
The first thing we at the Home Appraising Group do is inspecting your property to assess the status. Our job is to physically evaluate how many bedrooms and bathrooms are in the new home, what amenities are included and any other important features of the new property. To show the actual size or a property, some assessors create a sketch during their evaluation to show square footage, layout and floor plan information. The highest priority is to look for any amenities, defects or issues that could impact the property value.
After the inspection period ends it is up to us to use two or three standard analytical approaches in order to arrive at the value of the property. We generally apply a paired sales evaluation, a replacement cost computation, and an income approach in cases when rental is common.
ANALYZING COMPARABLE SALES
With an understanding of the area you live in or want to live in, our professionals know that certain aspects of where you live add value to your property. Taking this into consideration, the appraiser looks at sales of nearby homes and finds sales of homes that closely match the property in question. Next, they take into consideration value adds like fireplaces, original woodwork or fixtures and several others to find the right valuation. By adding or subtracting based on the similar sale prices, we can find the best valuation of your property.
- Consider several new construction properties that have sold in one area. One sold and the value reflects the fact that the home had a landscaped backyard with a large pool. The property being assessed is similar in size and characteristics but the yard is untouched. The value of the landscaped yard and pool would be deducted from the value of the home being appraised.
- The price would be added to the valuation, if the home being appraised were the one with the upscale backyard.
At Home Appraising Group, we pride ourselves on our understanding of the value of real estate elements in Pennsylvania. Our value based approach is often applied a home is being appraisal for purchase.
When using the cost method an appraiser uses several pieces of information to find the maximum property price. This includes the proposed cost for material and labor to build the same property in todays market. This is great information for very specific situations, but is not often used in general home appraisals.
VALUATION USING THE INCOME APPROACH
A third way of reaching valuation of a property is to investigate the cost of rental properties in your community. In this case, the level of income the property earns is compared with the revenue created by nearby homes to establish the value.
ARRIVING AT VALUE CONCLUSION
Once all of the information has been evaluated, the evaluator can then offer the estimated valuation for the new construction property. While the house may sell for slightly higher or lower, the value is a fair estimate of the range the house may earn on the market. The property may have amenities that drive the price higher than what is originally estimated. This value also gives the lender important information about how much money they can reasonably loan for the purchase of the home. In the end, one of our Home Appraising Group experts will work to give you an unbiased valuation of the new home so you can move forward.