A Description of the Appraisal Process

Their home's purchase is the biggest transaction some might ever make. It doesn't matter if a primary residence, an additional vacation property or an investment, the purchase of real property is an involved financial transaction that requires multiple parties to see it through.

You're probably familiar with the parties taking part in the transaction. The most known entity in the exchange is the real estate agent. Next, the lender provides the money needed to finance the transaction. And ensuring all requirements of the transaction are completed and that a clear title passes to the buyer from the seller is the title company.

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So, what party is responsible for making sure the value of the real estate is consistent with the amount being paid? In comes 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 TR Valuation, LLC will ensure, you as an interested party, are informed.

Appraisals start with the property inspection

Our first task at TR Valuation, LLC is to inspect the property to determine its true status. 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 truly are there and are in the shape a reasonable buyer would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is proper and conveying the layout of the property. Most importantly, the appraiser looks for any obvious features - or defects - that would have an impact on the value of the property.

Following the inspection, an appraiser uses two or three approaches to determining the value of the property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.

Replacement Cost

This is where we gather information on local building costs, labor rates and other elements to ascertain how much it would cost to construct a property similar to the one being appraised. This estimate often sets the maximum on what a property would sell for. It's also the least used method.

Paired Sales Analysis

Appraisers get to know the neighborhoods in which they appraise. They thoroughly understand the value of certain features to the homeowners of that area. Then, the appraiser researches recent sales in the neighborhood and finds properties which are 'comparable' to the home in question. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, extra bathrooms or bedrooms, or quality of construction, we adjust the comparable properties so that they are more accurately in line with the features of subject.

  • 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.
  • However, if the subject has an extra half-bathroom and the comparable does not, the appraiser might add a certain amount to the comparable property.

A true estimate of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. When it comes to knowing the true value of features of homes in Oklahoma City and Oklahoma, TR Valuation, LLC can't be beat. This approach to value is typically awarded the most weight when an appraisal is for a home purchase.

Valuation Using the Income Approach

A third way of valuing real estate is sometimes employed when an area has a reasonable number of renter occupied properties. In this scenario, the amount of income the real estate yields is factored in with other rents in the area for comparable properties to determine the current value.

Arriving at a Value Conclusion

Analyzing the data from all approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. The estimate of value on the appraisal report is not necessarily what's being paid for the property even though it is likely the best indication of what a property is worth. 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 typically employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. At the end of the day, an appraiser from TR Valuation, LLC will guarantee you get the most fair and balanced property value, so you can make profitable real estate decisions.