A Description of the Appraisal ProcessPurchasing real estate is the most important investment most of us could ever consider. Whether it's where you raise your family, a second vacation home or an investment, purchasing real property is a complex financial transaction that requires multiple parties to see it through. The majority of the parties participating are very familiar. The real estate agent is the most known face in the transaction. Then, the bank provides the financial capital required to finance the transaction. The title company ensures that all details of the exchange are completed and that the title is clear to transfer from the seller to the buyer. So, who's responsible for making sure the property is worth the purchase price? This is where you meet the appraiser. We provide an unbiased opinion 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. A licensed, certified, professional appraiser from Ortiz Hawaii Real Estate Solutions, LLC will ensure, you as an interested party, are informed. Appraisals begin with the home inspectionOur first duty at Ortiz Hawaii Real Estate Solutions, LLC is to inspect the property to determine its true status. We must see features first hand, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really exist and are in the condition a typical buyer would expect them to be. To ensure the stated square footage has not been misrepresented and illustrate the layout of the property, the inspection often includes creating a sketch of the floorplan. Most importantly, we identify any obvious features - or defects - that would affect the value of the property. Following the inspection, an appraiser uses two or three approaches to determining the value of the property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent. Cost ApproachHere, we use information on local construction costs, the cost of labor and other elements to figure out how much it would cost to replace the property being appraised. This figure often sets the maximum on what a property would sell for. It's also the least used predictor of value. Paired Sales AnalysisAppraisers become very familiar with the neighborhoods in which they work. They innately understand the value of particular features to the people of that area. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are 'comparable' to the real estate at hand. Using knowledge of the value of certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or additional storage space, we adjust the comparable properties so that they more accurately match the features of subject property.
An opinion of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. At Ortiz Hawaii Real Estate Solutions, LLC, we are experts when it comes to knowing the worth of particular items in Hilo and Hawaii County neighborhoods. The sales comparison approach to value is usually awarded the most importance when an appraisal is for a home exchange. Valuation Using the Income ApproachIn the case of income producing properties - rental houses for example - the appraiser may use an additional way of valuing real estate. In this case, the amount of income the real estate produces is factored in with income produced by nearby properties to determine the current value. Putting It All TogetherAnalyzing the data from all approaches, the appraiser is then ready to put down an estimated market value for the property in question. Note: While the appraised value is probably the most accurate indication of what a property is worth, it may not be the final sales price. There are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust the final price 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 the event they had to sell the property again. It all comes down to this, an appraiser from Ortiz Hawaii Real Estate Solutions, LLC will guarantee you get the most accurate property value, so you can make profitable real estate decisions. |