A Description of the Appraisal Process
A home purchase is the most serious transaction many of us might ever consider. Whether it's where you raise your family, a seasonal vacation home or an investment, purchasing real property is a complex transaction that requires multiple people working in concert to pull it all off.
It's likely you are familiar with the parties having a role in the transaction. The real estate agent is the most familiar entity in the transaction. Next, the mortgage company provides the financial capital required to bankroll the transaction. And ensuring all aspects of the transaction are completed and that the title is clear to pass to the buyer from the seller is the title company.
So, who makes sure the real estate is worth the amount being paid? In comes the appraiser. We provide an unbiased estimate 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 Appraisal-One will ensure, you as an interested party, are informed.
Inspecting the subject property
To ascertain an accurate status of the property, it's our duty to first perform a thorough inspection. We must see features 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 condition a typical buyer would expect them to be. To make sure the stated size of the property is accurate and convey the layout of the house, the inspection often entails creating a sketch of the floorplan. Most importantly, we identify any obvious amenities - or defects - that would have an impact on the value of the property.
Following the inspection, we use two or three approaches to determining the value of real property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.
Here, we pull information on local building costs, the cost of labor and other factors to figure out how much it would cost to replace the property being appraised. This estimate often sets the maximum on what a property would sell for. The cost approach is also the least used method.
Paired Sales Analysis
Appraisers get to know the communities in which they work. They thoroughly understand the value of certain features to the people of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the real estate in question. By assigning a dollar value to certain items such as square footage, additional bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we adjust the comparable properties so that they more accurately portray the features of subject property.
A true estimate of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. At Appraisal-One, we are experts when it comes to knowing the value of real estate features in Huntington Beach and Orange County neighborhoods. The sales comparison approach to value is typically given the most consideration when an appraisal is for a real estate sale.
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 situation, the amount of revenue the real estate produces is factored in with income produced by similar properties to derive the current value.
Coming Up With The Final Value
Examining the data from all approaches, the appraiser is then ready to document an estimated market value for the subject property. It is important to note that while this amount is probably the most reliable indication of what a property is worth, it probably will 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 typically employed as a guideline for lenders who don't want to loan a buyer more money than they could get back in the event they had to sell the property again. It all comes down to this, an appraiser from Appraisal-One will help you get the most accurate property value, so you can make the most informed real estate decisions.