What goes into an appraisal?A home purchase can be the largest investment many might ever make. It doesn't matter if it's where you raise your family, an additional vacation home or an investment, the purchase of real property is an involved financial transaction that requires multiple people working in concert to make it all happen.
Practically all the people involved are quite familiar. The most familiar face in the transaction is the real estate agent. Then, the bank provides the money required to fund the exchange. The title company ensures that all aspects of the sale are completed and that a clear title passes to the buyer from the seller.
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 parcel of real estate, where both buyer and seller are informed parties. A professional Pennsylvania licensed appraiser from Brightco Appraisal Services LLC. will ensure you as an interested party are informed.
Appraisals start with the property inspectionOur first duty at Brightco Appraisal Services LLC. is to inspect the property to ascertain its true status. We must physically view features, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed are there and are in the shape a reasonable buyer would expect them to be. To ensure the stated square footage is accurate and describe the layout of the home, the inspection often includes creating a sketch of the floor plan. Most importantly, we look for any obvious amenities - or defects - that would have an impact on the value of the house.
Once the site has been inspected, an appraiser employs two or three approaches when determining the value of the property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.
Replacement CostHere, we gather information on local construction costs, labor rates and other elements to calculate how much it would cost to build a property comparable to the one being appraised. This figure often sets the maximum on what a property would sell for. The cost approach is also the least used method.
Sales ComparisonAppraisers can tell you a lot about the neighborhoods in which they work. We thoroughly understand the value of certain features to the residents of that area. Then, the appraiser looks up recent transactions in the vicinity and finds properties which are 'comparable' to the real estate at hand. Using knowledge of the value of certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or extra storage space, we adjust the comparable properties so that they more accurately match the features of subject.
Valuation Using the Income ApproachIn the case of income producing properties - rental houses for example - we may use a third method of valuing real estate. In this situation, the amount of income the real estate produces is taken into consideration along with income produced by neighboring properties to determine the current value.
ReconciliationExamining the data from all approaches, the appraiser is then ready to document an estimated market value for the subject property. The estimate of value on 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 could sell for in an open market. There are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust an offer or listing price up or down. Regardless, the appraised value is typically used as a guideline for lenders who don't want to loan a buyer more money than they could get back in case they had to sell the property again. At the end of the day: An appraiser from Brightco Appraisal Services LLC. will guarantee you discover the most accurate property value, so you can make profitable real estate decisions.