A Description of the Appraisal Process
Acquiring a house is the most serious financial decision most could ever make. It doesn't matter if where you raise your family, a second vacation property or one of many rentals, purchasing real property is a detailed transaction that requires multiple people working in concert to pull it all off.
It's likely you are familiar with the parties taking part in the transaction. The real estate agent is the most recognizable face in the exchange. Then, the bank provides the financial capital needed to fund the exchange. And the title company sees to it that all areas of the sale are completed and that the title is clear to transfer from the seller to the purchaser.
So, who makes sure the value of the real estate is consistent with the purchase price? This is where you meet 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 Premier Appraisal of SoCal will ensure, you as an interested party, are informed.
The inspection is where an appraisal begins
Our first responsibility at Premier Appraisal of SoCal is to inspect the property to determine its true status. We must actually see aspects of the property, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they indeed are there and are in the condition a typical buyer would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is correct and illustrating the layout of the property. Most importantly, the appraiser identifies any obvious amenities - or defects - that would affect the value of the property.
Following the inspection, an appraiser uses 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, the appraiser gathers information on local building costs, labor rates and other factors to determine how much it would cost to construct a property similar to the one being appraised. This figure often sets the upper limit on what a property would sell for. The cost approach is also the least used predictor of value.
Paired Sales Analysis
Appraisers get to know the neighborhoods in which they work. They innately understand the value of specific features to the people of that area. Then, the appraiser looks up recent transactions in the vicinity and finds properties which are 'comparable' to the subject in question. By assigning a dollar value to certain items such as upgraded appliances, additional bathrooms, additional living area, quality of construction, lot size, we adjust the comparable properties so that they are more accurately in line with the features of subject property.
An opinion of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. At Premier Appraisal of SoCal, we are an authority in knowing the worth of particular items in Mission Viejo and Orange County neighborhoods. This approach to value is commonly given the most importance when an appraisal is for a home sale.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - we may use a third approach to value. In this situation, the amount of revenue the real estate produces is factored in with income produced by neighboring properties to give an indicator of the current value.
Arriving at a Value Conclusion
Combining information from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the property in question. The estimate of value at the bottom of the appraisal report is not always what's being paid for the property even though it is likely the best indication of what a property is worth. Prices can always be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. Regardless, the appraised value is typically used 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 help you discover the most fair and balanced property value, so you can make the most informed real estate decisions.