What Are the Parts of an Appraisal?
Purchasing a home can be the most significant financial decision most people might ever consider. Whether it's where you raise your family, an additional vacation home or a rental fixer upper, purchasing real property is an involved transaction that requires multiple parties to see it through.
It's likely you are familiar with the parties taking part in the transaction. The real estate agent is the most familiar face in the exchange. Then, the mortgage company provides the money needed to bankroll the transaction. And the title company sees to it that all requirements of the transaction are completed and that the title is clear to transfer to the buyer from the seller.
So, who's responsible for making sure the value of the property is in line with the amount being paid? 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 parcel of real estate, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Choice Appraisals, Inc. will ensure, you as an interested party, are informed.
Appraisals begin with the home inspection
To ascertain the true status of the property, it's our responsibility to first perform a thorough inspection. We must physically see aspects of the property, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they really are there and are in the condition a typical person would expect them to be. To make sure the stated size of the property is accurate and describe the layout of the property, the inspection often entails creating a sketch of the floorplan. Most importantly, we identify any obvious amenities - or defects - that would affect the value of the house.
Following the inspection, an appraiser uses two or three approaches to determining the value of the property: sales comparison and, in the case of a rental property, an income approach.
Here, we use information on local construction costs, labor rates and other elements to derive how much it would cost to replace the property being appraised. This figure often sets the maximum on what a property would sell for. The cost approach is also the least used method.
Appraisers become very familiar with the communities in which they appraise. They thoroughly understand the value of specific features to the people of that area. Then, the appraiser researches recent sales in the vicinity and finds properties which are 'comparable' to the subject being appraised. Using knowledge of the value of certain items such as upgraded appliances, extra 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.
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 Choice Appraisals, Inc., we are an authority in knowing the worth of particular items in Newbury Park and Ventura County neighborhoods. The sales comparison approach to value is usually given the most consideration when an appraisal is for a home sale.
Valuation Using the Income Approach
A third way of valuing a house is sometimes employed when a neighborhood has a measurable number of rental properties. In this case, the amount of income the property generates is taken into consideration along with other rents in the area for comparable properties to derive the current value.
Combining information from all approaches, the appraiser is then ready to state an estimated market value for the subject property. The estimate of value at the bottom of the appraisal report is not necessarily what's being paid for the property even though it is likely the best indication of what a property is worth. It's not uncommon for prices to be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. But 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. Here's what it all boils down to, an appraiser from Choice Appraisals, Inc. will guarantee you discover the most accurate property value, so you can make wise real estate decisions.