Home Appraisals: A Primer
Getting real estate is the largest transaction many of us may ever encounter. Whether it's where you raise your family, an additional vacation property or one of many rentals, purchasing real property is an involved financial transaction that requires multiple people working in concert to pull it all off.
You're probably familiar with the parties taking part in the transaction. The most recognizable entity in the exchange is the real estate agent. Next, the bank provides the money needed to bankroll the exchange. And the title company ensures that all aspects of the sale are completed and that a clear title transfers to the buyer from the seller.
So, who makes sure the value of the real estate is in line with the amount being paid? 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 Choice Appraisals, Inc. (Owner retired to SC) will ensure, you as an interested party, are informed.
The inspection is where an appraisal starts
Our first responsibility at Choice Appraisals, Inc. (Owner retired to SC) 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, amenities, etc., to ensure they really exist and are in the shape a typical person would expect them to be. To ensure the stated size of the property has not been misrepresented and illustrate the layout of the house, the inspection often entails creating a sketch of the floorplan. Most importantly, we look for any obvious amenities - or defects - that would have an impact on the value of the property.
Once the site has been inspected, 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.
This is where we pull information on local building costs, the cost of labor and other elements to determine how much it would cost to construct a property comparable to the one being appraised. This value usually sets the upper limit on what a property would sell for. The cost approach is also the least used method.
Appraisers are intimately familiar with the subdivisions in which they appraise. They thoroughly understand the value of particular features to the people of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the subject at hand. By assigning a dollar value to certain items such as square footage, additional bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we adjust the comparable properties so that they are more accurately in line with the features of subject.
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 Choice Appraisals, Inc. (Owner retired to SC), we are an authority when it comes to knowing the value of particular items in and Ventura County neighborhoods. This approach to value is most often awarded the most consideration when an appraisal is for a home purchase.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - the appraiser may use a third approach to value. In this case, the amount of revenue the real estate produces is taken into consideration along with other rents in the area for comparable properties to give an indicator of the current value.
Putting It All Together
Combining information from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. Note: While the appraised value is probably the best indication of what a house is worth, it may not be the final sales price. 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 often used as a guideline for lenders who don't want to loan a buyer more money than they could recover in case they had to sell the property again. At the end of the day, an appraiser from Choice Appraisals, Inc. (Owner retired to SC) will guarantee you get the most accurate property value, so you can make profitable real estate decisions.