What Are the Parts of an Appraisal?
A home purchase can be the most important transaction most people may ever make. It doesn't matter if a primary residence, an additional vacation property or an investment, the purchase of real property is a complex financial transaction that requires multiple parties to see it through.
Most people are familiar with the parties having a role in the transaction. The most familiar person in the transaction is the real estate agent. Next, the lender provides the money needed to finance the deal. And ensuring all areas of the exchange are completed and that a clear title transfers to the buyer from the seller is the title company.
So, what party is responsible for making sure the value of the real estate is consistent with the amount being paid? This is where you meet the appraiser. We provide an unbiased opinion of what a buyer could 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 The Appraisal Firm will ensure, you as an interested party, are informed.
Appraisals begin with the property inspection
Our first duty at The Appraisal Firm is to inspect the property to determine its true status. We must see features hands on, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed are present and are in the condition a reasonable buyer would expect them to be. To ensure the stated square footage is accurate and illustrate the layout of the home, the inspection often includes creating a sketch of the floorplan. Most importantly, we look for any obvious features - or defects - that would have an impact on the value of the house.
Following the inspection, we use two or three approaches to determining the value of the property: sales comparison and, in the case of a rental property, an income approach.
Here, we use information on local construction costs, labor rates and other elements to figure out 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. It's also the least used predictor of value.
Paired Sales Analysis
Appraisers become very familiar with the communities in which they work. They innately understand the value of specific features to the people of that area. Then, the appraiser looks up recent sales in close proximity to the subject and finds properties which are 'comparable' to the subject in question. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, we adjust the comparable properties so that they more accurately match the features of subject property.
After all differences have been accounted for, 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 valuing features of homes in Escondido and San Diego, The Appraisal Firm is your local authority. The sales comparison approach to value is typically given the most importance when an appraisal is for a home purchase.
Valuation Using the Income Approach
A third method of valuing real estate is sometimes employed when a neighborhood has a measurable number of renter occupied properties. In this case, the amount of revenue the real estate yields is taken into consideration along with income produced by similar properties to give an indicator of the current value.
Coming Up With The Final Value
Combining information from all approaches, the appraiser is then ready to document an estimated market value for the property in question. Note: While the appraised value is probably the most reliable indication of what a property is worth, it may not be the price at which the property closes. There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust an offer or listing price up or down. But 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 case they had to put the property on the market again. It all comes down to this, an appraiser from The Appraisal Firm will guarantee you discover the most accurate property value, so you can make the most informed real estate decisions.