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The purchase of a home is the single, largest investment most people will ever make in their lifetime. That is why we take the appraisal process very seriously and make sure that only the highest level of care is given within each appraisal we complete. As such, we felt it would be helpful if we explained how we come to the appraised value of residential properties. Within this section, you will find information about the inspection process and the approaches used in obtaining the real value of your property. The Home Inspection: The first step in the appraisal process is the home inspection. An appraiser's primary responsibility is to confirm and/or come to the true value of the property being appraised, of which an appraiser does through a home inspection. An appraiser must physically see the property’s features, such as: the number of bedrooms, the number of bathrooms and the property’s location, in order to ensure that the home’s condition is as a reasonable buyer would expect the property to be in. The inspection often includes a sketch of the property, ensuring the proper square footage and layout of the property. Most importantly, the appraiser looks for any obvious defects in the property that could affect the value of the house. Once the property has been inspected, an appraiser uses the following approaches in determining the value of the real property: 1) the cost approach; 2) the sales comparison approach; and in the case of a rental property, 3) the income approach. #1: The Cost Approach: With the cost approach, appraisers uses information on local building costs, labor rates and other factors to determine how much it would cost to construct a property similar to the one being appraised. This value often sets the upper limit on what a property would sell for. #2: The Sales Comparison Approach: With the sales comparison approach, appraisers get to know the neighborhoods in which they work and understand the value of certain features to the residents of that area. Appraisers know traffic patterns and school zones; and use this information to determine which property attributes will make a difference in the property’s value. Then, the appraiser researches recent sales in the property’s vicinity and finds properties which are ''comparable'' to the subject being appraised. The sales prices of these properties are used as a basis to begin the sales comparison approach. Using knowledge of the value of certain items such as square footage, extra bathrooms, hardwood floors, fireplaces or view lots (just to name a few), the appraiser adjusts the comparable properties to more accurately portray the subject property. #3: The Income Approach: With the income approach, appraisers may use a third approach to valuing the property. In this case, the amount of income the property produces in order to arrive at the current value of a property over the foreseeable future. Property Reconciliation Combining information from all approaches, appraisers are ready to put together an estimated market value for the property. It is important to note that while this amount is probably the best indication of a property’s worth, it may not be the final sales price. There are always mitigating factors such as seller motivation, urgency and/or ''bidding wars'' that may adjust the final price up or down. However, the appraised value is often used as a guideline for lenders who may not want to loan a buyer more money than the property is actually worth. |
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Watson Real Estate Appraisals, Inc. 4340 Big Barn Drive Suite 102 Little River, SC 29566 Office: (843) 399-3030 Fax: (843) 399-3334 e-mail : info@watsonappraisals.com |