What Is an Appraisal?
Getting real estate is the largest financial decision some people may ever consider. Whether it's a main residence, a seasonal vacation home or one of many rentals, purchasing real property is a detailed transaction that requires multiple parties to see it through.
The majority of the parties participating are quite familiar. The real estate agent is the most recognizable entity in the exchange. Next, the bank provides the money required to bankroll the deal. The title company ensures that all areas of the sale are completed and that a clear title passes to the buyer from the seller.
So, who's responsible for making sure the value of the real estate is consistent with the purchase price? In comes the appraiser. We provide an unbiased opinion 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 Dakota Plains Appraisal LLC will ensure, you as an interested party, are informed.
Inspecting the subject property
To determine an accurate status of the property, it's our responsibility to first conduct a thorough inspection. We must see features first hand, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really are there and are in the shape a typical 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, the appraiser looks for any obvious amenities - or defects - that would have an impact on the value of the property.
Back at the office, we use 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.
Here, we gather information on local building costs, labor rates and other factors to derive how much it would cost to build a property nearly identical to the one being appraised. This value usually sets the upper limit on what a property would sell for. The cost approach is also the least used predictor of value.
Analyzing Comparable Sales
Appraisers become very familiar with the subdivisions in which they work. They thoroughly understand the value of certain features to the homeowners of that area. Then, the appraiser looks up recent sales in close proximity to the subject 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 adjust the comparable properties so that they more accurately portray the features of subject property.
Once all necessary adjustments have been made, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. When it comes to knowing the true worth of features of homes in Pierre and Hughes, Dakota Plains Appraisal LLC can't be beat. This approach to value is most often awarded the most consideration when an appraisal is for a home sale.
Valuation Using the Income Approach
A third method of valuing approach to value is sometimes applied when an area has a reasonable number of renter occupied properties. In this situation, the amount of revenue the property yields is taken into consideration along with income produced by similar properties to give an indicator of the current value.
The Bottom Line
Combining information from all approaches, the appraiser is then ready to document an estimated market value for the subject property. Note: While this amount is probably the most accurate indication of what a house is worth, it probably will not be the price at which the property closes. It's not uncommon for prices to 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 used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. It all comes down to this, an appraiser from Dakota Plains Appraisal LLC will help you attain the most fair and balanced property value, so you can make the most informed real estate decisions.