What Goes Into an Appraisal?
Buying real estate can be the largest investment some could ever consider. Whether it's where you raise your family, an additional vacation home or an investment, purchasing real property is an involved financial transaction that requires multiple people working in concert to make it all happen.
You're likely to be familiar with the parties taking part in the transaction. The most known face in the transaction is the real estate agent. Then, the bank provides the money required to bankroll the deal. And ensuring all details of the exchange are completed and that a clear title transfers from the seller to the buyer is the title company.
So, who makes sure the value of the property is in line with the amount being paid? 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 Appraisal-One will ensure, you as an interested party, are informed.
Inspecting the subject property
Our first duty at Appraisal-One 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, living areas, etc, to ensure they indeed are present and are in the shape a reasonable person would expect them to be. To make sure the stated square footage is accurate and describe the layout of the home, the inspection often requires creating a sketch of the floorplan. 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 sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.
Here, the appraiser pulls information on local building costs, labor rates and other elements to figure out how much it would cost to replace the property being appraised. This estimate often sets the upper limit on what a property would sell for. It's also the least used predictor of value.
Appraisers get to know the communities in which they appraise. They thoroughly understand the value of specific 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 home being appraised. Using knowledge of the value of certain items such as upgraded appliances, additional bathrooms, additional living area, quality of construction, lot size, we add or subtract from each comparable's sales price so that they more accurately match the features of subject.
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 associating a value with features of homes in Huntington Beach and Orange, Appraisal-One is second to none. This approach to value is commonly awarded the most consideration when an appraisal is for a home purchase.
Valuation Using the Income Approach
A third method of valuing real estate is sometimes used when an area has a measurable number of renter occupied properties. In this case, the amount of income the real estate produces is taken into consideration along with other rents in the area for comparable properties to determine the current value.
Analyzing the data from all approaches, the appraiser is then ready to state an estimated market value for the property at hand. Note: While this amount is probably the most accurate indication of what a house is worth, it probably will 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 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 the property is actually worth. Here's what it all boils down to, an appraiser from Appraisal-One will guarantee you get the most fair and balanced property value, so you can make the most informed real estate decisions.