Acquiring a home is the most significant transaction many might ever make. It doesn't matter if where you raise your family, a second vacation home or a rental fixer upper, the purchase of real property is a detailed transaction that requires multiple parties to make it all happen.
Practically all the participants are very familiar. The most familiar face in the transaction is the real estate agent. Then, the bank provides the financial capital required to bankroll the exchange. And ensuring all details of the sale are completed and that a clear title passes from the seller to the buyer is the title company.
So, who's responsible for making sure the real estate is worth 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 property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from EKJ Appraisals will ensure, you as an interested party, are informed.
Appraisals begin with the home inspection
To ascertain the true status of the property, it's our responsibility to first complete a thorough inspection. We must see features hands on, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly are there and are in the shape a reasonable buyer would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is accurate and illustrating the layout of the property. Most importantly, we look for any obvious amenities - or defects - that would have an impact on the value of the house.
After the inspection, an appraiser uses two or three approaches to determining the value of real property: sales comparison and, in the case of a rental property, an income approach.
This is where the appraiser analyzes information on local building costs, the cost of labor and other elements to determine how much it would cost to replace the property being appraised. This value often sets the upper limit on what a property would sell for. It's also the least used method.
Appraisers get to know the subdivisions in which they work. They innately understand the value of specific features to the residents of that area. Then, the appraiser researches recent transactions in the vicinity and finds properties which are 'comparable' to the real estate being appraised. Using knowledge of the value of 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 more accurately portray the features of subject property.
A true estimate of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. At EKJ Appraisals, we are experts in knowing the value of particular items in Rogers and Hennepin County neighborhoods. This approach to value is usually given the most consideration 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 an area has a reasonable number of rental properties. In this situation, the amount of revenue the real estate generates is taken into consideration along with income produced by comparable properties to determine the current value.
Arriving at a Value Conclusion
Examining the data from all applicable approaches, the appraiser is then ready to document an estimated market value for the property in question. Note: While this amount is probably the best indication of what a property is worth, it may not be the price at which the property closes. 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 typically used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. Here's what it all boils down to, an appraiser from EKJ Appraisals will guarantee you attain the most accurate property value, so you can make wise real estate decisions.