Home Appraisals: A Primer
Acquiring real estate can be the largest transaction most of us may ever make. It doesn't matter if a primary residence, a seasonal vacation home or an investment, the purchase of real property is a complex transaction that requires multiple parties to pull it all off.
The majority of the parties participating are very familiar. The most known person in the exchange is the real estate agent. Next, the lender provides the financial capital needed to bankroll the exchange. And ensuring all details of the sale are completed and that a clear title transfers from the seller to the purchaser is the title company.
So, what party is responsible for making sure the property is worth the purchase price? This is where you meet the appraiser. We provide an unbiased opinion of what a buyer might expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from TSH Real Estate and Appraisal Services, LLC will ensure, you as an interested party, are informed.
Inspecting the subject property
Our first responsibility at TSH Real Estate and Appraisal Services, LLC is to inspect the property to determine its true status. We must actually see features, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they really are there and are in the condition a reasonable person would expect them to be. To make sure the stated size of the property is accurate and illustrate the layout of the house, the inspection often entails creating a sketch of the floorplan. Most importantly, the appraiser looks for any obvious features - or defects - that would have an impact on the value of the property.
Back at the office, we use two or three approaches to determining the value of real property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.
Here, we pull information on local building costs, the cost of labor and other factors to ascertain how much it would cost to replace the property being appraised. This figure commonly sets the upper limit on what a property would sell for. The cost approach is also the least used predictor of value.
Paired Sales Analysis
Appraisers become very familiar with the subdivisions in which they appraise. They thoroughly understand the value of specific features to the residents of that area. Then, the appraiser looks up recent sales in the neighborhood and finds properties which are 'comparable' to the real estate in question. Using knowledge of the value of certain items such as square footage, additional bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we adjust the comparable properties so that they are more accurately in line with the features of subject.
In the end, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At TSH Real Estate and Appraisal Services, LLC, we are experts when it comes to knowing the worth of real estate features in Kaneohe and Honolulu County neighborhoods. The sales comparison approach to value is usually given the most importance when an appraisal is for a real estate exchange.
Valuation Using the Income Approach
A third way of valuing approach to value is sometimes employed when a neighborhood has a measurable number of renter occupied properties. In this case, the amount of revenue the property yields is factored in with other rents in the area for comparable properties to derive the current value.
Analyzing the data from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the property at hand. Note: While this amount is probably the most accurate indication of what a house is worth, it may not be the price at which the property closes. There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust an offer or listing price up or down. But the appraised value is often used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. It all comes down to this, an appraiser from TSH Real Estate and Appraisal Services, LLC will help you discover the most accurate property value, so you can make profitable real estate decisions.