Decoding the Appraisal Process
Acquiring a house can be the biggest transaction some of us could ever consider. It doesn't matter if where you raise your family, a seasonal vacation property or an investment, purchasing real property is an involved 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 real estate agent is the most recognizable person in the exchange. Next, the bank provides the money required to bankroll the transaction. And the title company makes sure that all aspects of the exchange are completed and that the title is clear to pass to the buyer from the seller.
So, who makes sure the real estate is worth 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 parcel of real estate, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Killo Appraisal Services, LLC will ensure, you as an interested party, are informed.
The inspection is where an appraisal starts
Our first task at Killo Appraisal Services, LLC is to inspect the property to determine its true status. We must see features hands on, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they truly are there and are in the condition a typical person would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is correct and illustrating the layout of the property. Most importantly, we look for any obvious features - or defects - that would affect the value of the property.
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 analyzes information on local construction costs, labor rates and other elements to determine how much it would cost to build a property similar to the one being appraised. This value often sets the upper limit on what a property would sell for. It's also the least used predictor of value.
Analyzing Comparable Sales
Appraisers can tell you a lot about the neighborhoods in which they work. They innately understand the value of certain features to the people of that area. Then, the appraiser looks up recent sales in the area and finds properties which are 'comparable' to the property at hand. Using knowledge of the value of 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 are more accurately in line with the features of subject.
A true estimate of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. When it comes to knowing the true value of features of homes in San Antonio and Bexar, Killo Appraisal Services, LLC can't be beat. The sales comparison approach to value is commonly awarded the most importance when an appraisal is for a real estate purchase.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - the appraiser may use a third approach to value. In this case, the amount of revenue the real estate yields is taken into consideration along with income produced by neighboring properties to derive the current value.
Analyzing the data from all approaches, the appraiser is then ready to document an estimated market value for the property at hand. The estimate of value at the bottom of the appraisal report is not necessarily what's being paid for the property even though it is likely the best indication of what a property is worth. 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 they could recover in the event they had to sell the property again. At the end of the day, an appraiser from Killo Appraisal Services, LLC will help you discover the most fair and balanced property value, so you can make wise real estate decisions.