A Description of the Appraisal ProcessBuying a home can be the biggest investment some of us may ever encounter. It doesn't matter if it's a primary residence, an additional vacation home or a rental fixer upper, purchasing real property is a detailed financial transaction that requires multiple parties to make it all happen.
You're likely to be familiar with the parties having a role in the transaction. The real estate agent is the most known entity in the exchange. Then, the lender provides the money required to bankroll the deal. The title company makes sure that all areas of the transaction are completed and that a clear title transfers from the seller to the purchaser.
So who makes sure the value of the real estate is consistent with the purchase price? This is where you meet the appraiser. We provide an unbiased opinion of what a buyer could expect to pay - or a seller receive - for a property, where both buyer and seller are informed parties. A professional Hawaii licensed appraiser from Maui Aina Appraisal Company will ensure you as an interested party are informed.
The inspection is where an appraisal startsTo determine an accurate status of the property, it's our duty to first conduct a thorough inspection. We must see features hands on, such as the number of bedrooms and bathrooms, the location, living areas, etc., to ensure they indeed are there and are in the condition a reasonable buyer would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is proper and conveying the layout of the property. Most importantly, we look for any obvious amenities - or defects - that would have an impact on the value of the property.
Back at the office, we use two or three approaches when determining the value of real property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.
Cost ApproachHere, the appraiser pulls information on local construction costs, labor rates and other factors to determine how much it would cost to replace the property being appraised. This value often sets the maximum on what a property would sell for. The cost approach is also the least used method.
Analyzing Comparable SalesAppraisers are intimately familiar with the subdivisions in which they appraise. We thoroughly understand the value of specific features to the residents of that area. Then, the appraiser looks up recent sales in close proximity to the subject and finds properties which are 'comparable' to the real estate in question. By assigning a dollar value to certain items such as square footage, extra bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we add or subtract from each comparable's sales price so that they more accurately match the features of subject property.
Valuation Using the Income ApproachA third method of valuing a house is sometimes employed when an area has a measurable number of rental properties. In this case, the amount of income the real estate produces is factored in with other rents in the area for comparable properties to give an indicator of the current value.
The Bottom LineCombining information from all approaches, the appraiser is then ready to put down an estimated market value for the property in question. The estimate of value on the appraisal report is not always what's being paid for the property even though it is likely the best indication of a property's market value 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 used as a guideline for lenders who don't want to loan a buyer more money than they could recover in case they had to put the property on the market again. Here's what it all boils down to: An appraiser from Maui Aina Appraisal Company will guarantee you attain the most accurate property value, so you can make profitable real estate decisions.