What Is an Appraisal?
Getting a house can be the biggest investment most people will ever make. It doesn't matter if a primary residence, a seasonal vacation home or a rental fixer upper, the purchase of real property is a complex transaction that requires multiple parties to see it through.
Practically all the participants are very familiar. The most familiar entity in the exchange is the real estate agent. Next, the mortgage company provides the financial capital required to finance the transaction. And the title company ensures that all aspects of the exchange are completed and that a clear title transfers from the seller to the buyer.
So, who's responsible for making sure the value of the real estate is consistent with the amount being paid? This is where the appraiser comes in. 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. will ensure, you as an interested party, are informed.
Inspecting the subject property
Our first task at Choice Appraisals, Inc. is to inspect the property to ascertain its true status. We must see features hands on, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they indeed exist 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 document the layout of the home, the inspection often entails creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious features - 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: paired sales analysis and, in the case of a rental property, an income approach.
This is where we gather information on local building costs, the cost of labor and other elements to determine how much it would cost to replace the property being appraised. This estimate usually sets the upper limit on what a property would sell for. It's also the least used predictor of value.
Appraisers are intimately familiar with the subdivisions in which they work. They innately understand the value of certain features to the people of that area. Then, the appraiser looks up recent sales in close proximity to the subject and finds properties which are 'comparable' to the subject in question. By assigning a dollar value to 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 match 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. When it comes to associating a value with features of homes in Newbury Park and Ventura, Choice Appraisals, Inc. is second to none. This approach to value is usually awarded the most consideration when an appraisal is for a real estate exchange.
Valuation Using the Income Approach
A third way of valuing approach to value is sometimes used when an area has a measurable number of renter occupied properties. In this situation, the amount of revenue the property generates is factored in with income produced by comparable properties to give an indicator of the current value.
Putting It All Together
Combining information from all approaches, the appraiser is then ready to put down an estimated market value for the subject property. The estimate of value on 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. There are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust an offer or listing price 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 they could recover in case they had to sell the property again. 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.