A Description of the Appraisal Process

Getting real estate can be the largest transaction many of us might ever encounter. Whether it's where you raise your family, a second vacation home or a rental fixer upper, the purchase of real property is a complex financial transaction that requires multiple people working in concert to pull it all off.

It's likely you are familiar with the parties taking part in the transaction. The real estate agent is the most known entity in the exchange. Then, the bank provides the financial capital required to fund the exchange. And the title company makes sure that all details of the transaction are completed and that a clear title transfers from the seller to the purchaser.

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So, who's responsible for making sure the value of the real estate is in line with the amount being paid? In comes 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 licensed, certified, professional appraiser from Noteboom Appraisals, Inc. will ensure, you as an interested party, are informed.

Inspecting the subject property

To ascertain an accurate status of the property, it's our responsibility to first perform a thorough inspection. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really are present and are in the shape a typical person would expect them to be. To ensure the stated size of the property has not been misrepresented and convey the layout of the house, the inspection often requires creating a sketch of the floorplan. Most importantly, we identify any obvious amenities - or defects - that would have an impact on the value of the house.

Once the site has been inspected, an appraiser uses two or three approaches to determining the value of real property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.

Cost Approach

Here, the appraiser gathers information on local construction costs, the cost of labor and other factors to calculate how much it would cost to replace the property being appraised. This figure often sets the upper limit on what a property would sell for. It's also the least used method.

Analyzing Comparable Sales

Appraisers get to know the communities in which they work. They thoroughly understand the value of particular features to the residents of that area. Then, the appraiser researches recent sales in the vicinity and finds properties which are 'comparable' to the property in question. Using knowledge of the value of certain items such as upgraded appliances, additional bathrooms, additional living area, quality of construction, lot size, 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 does not, the appraiser may deduct the value of that half bath from the sales price of the comparable.
But, in the case where the subject has something such as an extra half bath that a comparable doesn't have, the appraiser might add the value of that bath to the comparable property.

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 Noteboom Appraisals, Inc. , we are an authority in knowing the worth of particular items in Sioux Falls and Minnehaha County neighborhoods. This approach to value is most often awarded the most weight when an appraisal is for a home exchange.

Valuation Using the Income Approach

A third method of valuing approach to value is sometimes used when a neighborhood has a measurable number of renter occupied properties. In this scenario, the amount of revenue the real estate produces is taken into consideration along with other rents in the area for comparable properties to give an indicator of the current value.

Reconciliation

Examining the data from all approaches, the appraiser is then ready to put down an estimated market value for the property at hand. It is important to note that while this amount is probably the most reliable indication of what a property is worth, it may not be the final sales price. Depending on the specific 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 employed as a guideline for lenders who don't want to loan a buyer more money than they could recover in case they had to sell the property again. Here's what it all boils down to, an appraiser from Noteboom Appraisals, Inc. will guarantee you get the most fair and balanced property value, so you can make wise real estate decisions.