Making Sense of the Appraisal Process
A home purchase can be the most significant transaction many might ever encounter. It doesn't matter if it's a main residence, an additional vacation property or one of many rentals, the purchase of real property is an involved transaction that requires multiple people working in concert to see it through. |
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The majority of the participants are very familiar. The real estate agent is the most familiar person in the exchange. Then, the mortgage company provides the financial capital required to bankroll the deal. 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's responsible for making sure the value of the property is consistent with the purchase price? In comes 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 Montana licensed appraiser from Residential Appraisal Service will ensure you as an interested party are informed.
The inspection is where an appraisal begins
To ascertain the true status of the property, it's our responsibility to first conduct a thorough inspection. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, living areas, etc., to ensure they indeed are present and are in the shape a typical buyer would expect them to be. The inspection often includes a sketch of the floor plan, ensuring the square footage is accurate and conveying the layout of the property. Most importantly, we identify any obvious features - or defects - that would have an impact on the value of the house.Once the site has been inspected, we use 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 Cost
Here, we analyze information on local building costs, labor rates and other elements to derive how much it would cost to construct a property similar to the one being appraised. This estimate commonly sets the upper limit on what a property would sell for. The cost approach is also the least used method.Paired Sales Analysis
Appraisers can tell you a lot about the subdivisions in which they work. We thoroughly understand the value of particular features to the homeowners of that area. Then, the appraiser looks up recent transactions in the area and finds properties which are 'comparable' to the home in question. By assigning a dollar value to certain items such as upgraded appliances, additional bathrooms, an additional living area, quality of construction, lot size, we adjust the comparable properties so that they more accurately match the features of subject property.- If, for example, the comparable has an extra half bath that the subject does not, the appraiser may subtract the value of that half bath from the sales price of the comparable home.
- 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.