September 16, 2015

What is an Appraisal?

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September 16, 2015
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A home purchase is the largest, single investment most people will ever make. Whether it’s a primary residence, a second vacation home or an investment property, the purchase of real estate is a complex financial transaction that requires multiple parties to pull it all off.

Most of the people involved are very familiar. The Realtor is the most common face of the transaction. The mortgage company provides the financial capital necessary to fund the transaction. The title company ensures that all aspects of the transaction are completed and that a clear title passes from the seller to the buyer.

So who makes sure the value of the property is in line with the amount being paid?  There are too many people exposed in the real estate process to let such a transaction proceed without ensuring that the value of the property is commensurate with the amount being paid.

This is where the appraisal comes in. An appraisal is an unbiased estimate of what a buyer might expect to pay – or a seller receive – for a parcel of real estate, where both buyer and seller are informed parties. To be an informed party, most people turn to a licensed, professional appraiser to provide them with the most accurate estimate of the true value of their property.

The Inspection
So what goes into a real estate appraisal?  It all starts with the inspection. An appraiser’s duty is to inspect the property being appraised to ascertain the true status of that property. The appraiser must actually see features, such as the number of bedrooms, bathrooms, the location, and so on, to ensure that they really exist and are in the condition a reasonable buyer would expect them to be. The inspection often includes a sketch of the property, ensuring the proper square footage and conveying the layout of the property.  Most importantly, the appraiser looks for any obvious features – or defects – that would affect 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 cost approach, a sales comparison and, in the case of an income producing property such as an apartment building or office, the income capitalization approach.

Cost Approach
The cost approach is the easiest to understand. The appraiser 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. Why would you pay more for an existing property if you could spend less and build a brand new home instead?  While there may be mitigating factors, such as location and amenities, these are usually not reflected in the cost approach.

Sales Comparison
Instead, appraisers rely on the sales comparison approach to value these types of items. Appraisers get to know the neighborhoods in which they work. They understand the value of certain features to the residents of that area. They know the traffic patterns, the school zones, the busy throughways; and they use this information to determine which attributes of a property will make a difference in the value. Then, the appraiser researches recent sales in the 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. For example, if the comparable property has a fireplace and the subject does not, the appraiser may deduct the value of a fireplace 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 a certain amount to the comparable property.

In the case of income producing properties – rental houses for example – the appraiser may use a third approach to valuing the property. In this case, the amount of income the property produces is used to arrive at the current value of those revenues over the foreseeable future.

Reconciliation
Combining information from all approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. It is important to note that while this amount is probably the best indication of what a property is worth, it may not be the final sales price. There are always mitigating factors such as seller motivation, urgency or ”bidding wars” that may adjust the final 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 that the property is actually worth. The bottom line is: an appraiser will help you get the most accurate property value, so you can make the most informed real estate decisions.

March 24, 2015

5 Steps to Faster Turn Times

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March 24, 2015
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If you worked with appraisers ten years ago, you know how much technology has changed since then. What you might not realize is that there have been many developments in technology and e-commerce that have improved turnaround times on appraisal assignments. We’re taking advantage of them. Are you taking advantage of every opportunity you have to speed up the process? Here are some suggestions. Are you ordering appraisals online? With online ordering, you get automatic e-mail acknowledgements that the assignment was received, and fast, secure .PDF format report delivery. It’s the single biggest time saver available to both of us! We don’t have to retype information from a fax, and you don’t have to wonder whether we received the order.

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Are you providing complete and accurate information about the subject property? There’s nothing like being one number off on the street address to add unnecessary time to an appraisal assignment. And if you have a tax parcel number, plat map number, subdivision name or anything else that uniquely identifies the property, please pass it along. We even welcome lists of recent sales in the area — though be advised that professional appraisers must always do their own due diligence on comparable sales, and ours might differ from yours.

3
Are you letting us know up front any details about the property that might make it unique? Cookie-cutter homes are relatively easy to appraise. What takes time is analyzing how unique features contribute to or detract from what otherwise would be a property’s market value. Let us know up front when you order your report if there are unique features of the home or surrounding area — for example, it’s had a recent addition put on, it’s subject to zoning restrictions, it’s prone to flooding. These are things we’ll find out on our own anyway, and knowing them as soon as possible makes your report arrive more quickly.

4
Are you making the occupants of the home aware of what to expect? One of the most time consuming parts of the appraisal process is setting an appointment with the occupants of the home. Some homeowners are understandably uncomfortable with the fact a stranger wants to come in their house and look around and make notes. Some think they have to make the place spotless before the appraiser comes by, thinking that will make the house appraise higher. So they put off the appointment until they can get around to cleaning.Hearing from you — someone they’ve been working with on their loan — a little bit about the appraisal process, who we are, and especially that dusting and polishing won’t make it more likely their sale will close, can go a long way toward trimming the time it takes to inspect a home. Please feel free to point them to this website, where we have many pages of information for homeowners as well as others about the appraisal process. Encourage them to call us if they want to familiarize themselves with our staff and services. And tell them it’s in their interest to set the appointment as quickly as possible!

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Are you using our website as a resource to keep track of your report’s status? Phone and fax tag are a thing of the past with up to the minute status updates available online, anytime, 24/7. As each important milestone in an assignment is completed, that information is available to you online. It’s never been easier and faster to keep track of your report’s status.

March 24, 2015

Professional Listing Appraisals

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March 24, 2015
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Experts agree – pricing a home is the key to selling.

Syndicated columnist Robert J. Bruss states,”Price your home right and its half sold!”

National trainer for real estate sales agents, David S. Knox, lists these seven benefits to proper pricing:

1. Faster sale.
2. Less inconvenience.
3. Exposure to more prospects.
4. Increased salesperson response.
5. Better response from advertising and sign calls.
6. Attracts higher offers.
7. More money to sellers.
So, to assist you in setting the correct price for your listing, Censeo Valuation Consultants has created the Professional Listing Appraisal.
Just as lenders prequalify home buyers, now you can prequalify your listing to sell. The Professional Listing Appraisal gives you a complete summary appraisal report similar to those used by banks. You can use it to set your price, counter low offers and speed your listing to a sale. Not only does the home seller benefit but the buyer also gets a discount if they use us for the *Closing Appraisal (dependent upon lender regulations). It saves them money, speeds closing and helps prevent last minute problems due to the appraisal. Take a look at the benefits of a Professional Listing Appraisals.