Making Sense of the Appraisal Process
Their home's purchase is the most important financial decision many might ever consider. Whether it's a primary residence, an additional vacation home or an investment, purchasing real property is an involved financial transaction that requires multiple people working in concert to see it through.
It's likely you are familiar with the parties having a role in the transaction. The real estate agent is the most familiar person in the transaction. Next, the lender provides the financial capital required to finance the exchange. And the title company sees to it that all requirements of the sale are completed and that a clear title transfers from the seller to the purchaser.
So, who makes sure the value of the property is in line with the purchase price? In comes the appraiser. We provide an unbiased estimate of what a buyer might expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from The Appraisal Service will ensure, you as an interested party, are informed.
Inspecting the subject property
Our first duty at The Appraisal Service is to inspect the property to ascertain its true status. We must physically view features, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really are present and are in the shape a typical person would expect them to be. To ensure the stated square footage is accurate and convey the layout of the home, the inspection often requires creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious amenities - or defects - that would have an impact on the value of the house.
Back at the office, an appraiser uses two or three approaches to determining the value of the property: paired sales analysis and, in the case of a rental property, an income approach.
Here, we analyze information on local building costs, the cost of labor and other elements to derive how much it would cost to construct a property nearly identical to the one being appraised. This figure commonly sets the upper limit on what a property would sell for. It's also the least used predictor of value.
Appraisers become very familiar with the subdivisions in which they work. They thoroughly understand the value of certain features to the people of that area. Then, the appraiser researches recent transactions in close proximity to the subject and finds properties which are 'comparable' to the subject at hand. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, we add or subtract from each comparable's sales price so that they more accurately portray the features of subject.
An opinion of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. When it comes to valuing features of homes in La Jolla and San Diego, The Appraisal Service is your local authority. This approach to value is typically awarded the most weight when an appraisal is for a real estate purchase.
Valuation Using the Income Approach
A third way of valuing a property is sometimes used when an area has a measurable number of rental properties. In this case, the amount of income the real estate yields is factored in with other rents in the area for comparable properties to derive the current value.
Arriving at a Value Conclusion
Analyzing the data from all applicable approaches, the appraiser is then ready to put down an estimated market value for the subject property. It is important to note that while this amount is probably the best indication of what a property is worth, it may not be the price at which the property closes. Depending on the individual circumstances of the buyer or seller, their level of urgency or a buyer's desire for that exact property, the closing price of a home can always be driven 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 the property is actually worth. At the end of the day, an appraiser from The Appraisal Service will guarantee you attain the most fair and balanced property value, so you can make profitable real estate decisions.