What Are the Parts of an Appraisal?
Their home's purchase can be the most significant financial decision some of us may ever consider. It doesn't matter if a primary residence, a second vacation home or a rental fixer upper, the purchase of real property is a detailed transaction that requires multiple parties to see it through.
Practically all the participants are very familiar. The most familiar person in the exchange is the real estate agent. Next, the mortgage company provides the financial capital necessary to fund the deal. And ensuring all details of the sale 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 real estate is worth the purchase price? This is where the appraiser comes in. 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 Premier Appraisal of SoCal will ensure, you as an interested party, are informed.
The inspection is where an appraisal starts
Our first duty at Premier Appraisal of SoCal 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, and so on, to ensure they really exist and are in the shape a typical buyer would expect them to be. To ensure the stated square footage has not been misrepresented and convey the layout of the home, the inspection often entails 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 property.
Back at the office, we use 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.
This is where we gather information on local construction costs, labor rates and other elements to ascertain 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.
Analyzing Comparable Sales
Appraisers get to know the subdivisions in which they appraise. They innately understand the value of specific features to the people of that area. Then, the appraiser looks up recent sales in the neighborhood and finds properties which are 'comparable' to the property in question. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, extra bathrooms or bedrooms, or quality of construction, we adjust the comparable properties so that they are more accurately in line with 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. At Premier Appraisal of SoCal, we are an authority in knowing the value of real estate features in Mission Viejo and Orange County neighborhoods. The sales comparison approach to value is commonly awarded the most consideration when an appraisal is for a real estate purchase.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - we may use an additional approach to value. In this case, the amount of income the real estate generates is taken into consideration along with other rents in the area for comparable properties to determine the current value.
The Bottom Line
Examining the data from all 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 most reliable indication of what a house is worth, it probably will not be the final sales price. Depending on the specific situations 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.Regardless, 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. It all comes down to this, an appraiser from Premier Appraisal of SoCal will guarantee you attain the most accurate property value, so you can make wise real estate decisions.