What goes into an appraisal?
One's home purchase is the most important transaction some of us might ever make. It doesn't matter if it's where you raise your family, an additional vacation property or one of many rentals, the purchase of real property is a detailed financial transaction that requires multiple parties to pull it all off.
Practically all the parties participating are quite familiar. The most known person in the transaction is the real estate agent. Then, the lender provides the financial capital necessary to bankroll the deal. Ensuring all areas of the exchange are completed and that a clear title passes from the seller to the purchaser is the title company.
So who makes sure the property is consistent with the purchase price? This is where the appraiser comes in. We provide an unbiased estimate 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 Illinois licensed appraiser from William Kozik will ensure you as an interested party are informed.
Inspecting the subject property To ascertain the true status of the property, it's our duty to first conduct a thorough inspection. We must see features first hand, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed are there and are in the condition a typical buyer would expect them to be. To ensure the stated size of the property has not been misrepresented and document the layout of the house, the inspection often includes creating a sketch of the floor plan. Most importantly, the appraiser identifies any obvious features - or defects - that would have an impact on the value of the house.
Following the inspection, we use two or three approaches when determining the value of real property: paired sales analysis and, in the case of a rental property, an income approach.
Replacement Cost This is where the appraiser gathers information on local construction costs, the cost of labor and other factors to derive how much it would cost to replace the property being appraised. This value commonly sets the maximum on what a property would sell for. The cost approach is also the least used method.
Sales Comparison Appraisers are intimately familiar with the subdivisions in which they work. We thoroughly understand the value of certain features to the residents of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the property at hand. By assigning a dollar value to certain items such as fireplaces, room layout, appliance upgrades, extra bathrooms or bedrooms, or quality of construction, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject.
Valuation Using the Income Approach In the case of income producing properties - rental houses for example - the appraiser may use a third way of valuing a property. In this situation, the amount of revenue the real estate generates is taken into consideration along with other rents in the area for comparable properties to determine the current value.
Coming Up With the Final Value Analyzing the data from all applicable approaches, the appraiser is then ready to document an estimated market value for the property at hand. It is important to note that while this amount is probably the strongest indication of what a property would sell for in an open market, it probably will not be the price at which the property closes. Prices can always be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. But the appraised value is typically employed as a guideline for lenders who don't want to loan a buyer more money than the property would likely sell for in an open marketplace. At the end of the day: An appraiser from William Kozik will help you discover the most accurate property value, so you can make the most informed real estate decisions.
William Kozik | Phone: 708-476-0151 | Fax: 888-807-1521 | Email: [email protected]
One's home purchase is the most important transaction some of us might ever make. It doesn't matter if it's where you raise your family, an additional vacation property or one of many rentals, the purchase of real property is a detailed financial transaction that requires multiple parties to pull it all off.
Practically all the parties participating are quite familiar. The most known person in the transaction is the real estate agent. Then, the lender provides the financial capital necessary to bankroll the deal. Ensuring all areas of the exchange are completed and that a clear title passes from the seller to the purchaser is the title company.
So who makes sure the property is consistent with the purchase price? This is where the appraiser comes in. We provide an unbiased estimate 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 Illinois licensed appraiser from William Kozik will ensure you as an interested party are informed.
Inspecting the subject property To ascertain the true status of the property, it's our duty to first conduct a thorough inspection. We must see features first hand, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed are there and are in the condition a typical buyer would expect them to be. To ensure the stated size of the property has not been misrepresented and document the layout of the house, the inspection often includes creating a sketch of the floor plan. Most importantly, the appraiser identifies any obvious features - or defects - that would have an impact on the value of the house.
Following the inspection, we use two or three approaches when determining the value of real property: paired sales analysis and, in the case of a rental property, an income approach.
Replacement Cost This is where the appraiser gathers information on local construction costs, the cost of labor and other factors to derive how much it would cost to replace the property being appraised. This value commonly sets the maximum on what a property would sell for. The cost approach is also the least used method.
Sales Comparison Appraisers are intimately familiar with the subdivisions in which they work. We thoroughly understand the value of certain features to the residents of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the property at hand. By assigning a dollar value to certain items such as fireplaces, room layout, appliance upgrades, extra bathrooms or bedrooms, or quality of construction, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject.
- Say, for example, the comparable property has an extra half bath that the subject doesn't, the appraiser may subtract the value of that half bath from the sales price of the comparable home.
- If the subject property has an extra half-bathroom and the comparable does not, the appraiser might add an amount to the comparable property.
Valuation Using the Income Approach In the case of income producing properties - rental houses for example - the appraiser may use a third way of valuing a property. In this situation, the amount of revenue the real estate generates is taken into consideration along with other rents in the area for comparable properties to determine the current value.
Coming Up With the Final Value Analyzing the data from all applicable approaches, the appraiser is then ready to document an estimated market value for the property at hand. It is important to note that while this amount is probably the strongest indication of what a property would sell for in an open market, it probably will not be the price at which the property closes. Prices can always be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. But the appraised value is typically employed as a guideline for lenders who don't want to loan a buyer more money than the property would likely sell for in an open marketplace. At the end of the day: An appraiser from William Kozik will help you discover the most accurate property value, so you can make the most informed real estate decisions.
William Kozik | Phone: 708-476-0151 | Fax: 888-807-1521 | Email: [email protected]