What Goes Into an Appraisal?
Their home's purchase can be the largest investment many of us will ever make. It doesn't matter if where you raise your family, an additional vacation property or an investment, the purchase of real property is an involved transaction that requires multiple people working in concert to pull it all off.
The majority of the people participating are quite familiar. The real estate agent is the most known person in the exchange. Then, the mortgage company provides the financial capital needed to fund the deal. And the title company ensures that all details of the sale are completed and that a clear title passes to the buyer from the seller.
So, who's responsible for making sure the value of the property is consistent with the amount being paid? In comes the appraiser. 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 1st Quality Appraisals, Inc will ensure, you as an interested party, are informed.
Appraisals begin with the home inspection
To ascertain an accurate status of the property, it's our duty to first complete a thorough inspection. We must actually see aspects of the property, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they indeed are present and are in the shape a reasonable buyer would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is proper and conveying the layout of the property. Most importantly, the appraiser identifies any obvious amenities - or defects - that would have an impact on the value of the house.
Back at the office, 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.
This is where the appraiser analyzes information on local construction costs, labor rates and other elements to determine how much it would cost to replace the property being appraised. This figure often sets the maximum on what a property would sell for. It's also the least used predictor of value.
Analyzing Comparable Sales
Appraisers get to know the neighborhoods in which they work. They thoroughly understand the value of particular features to the residents of that area. Then, the appraiser looks up recent transactions in the vicinity and finds properties which are 'comparable' to the real estate at hand. By assigning a dollar value to certain items such as upgraded appliances, extra bathrooms, additional living area, quality of construction, lot size, we add or subtract from each comparable's sales price so that they more accurately match 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 1st Quality Appraisals, Inc, we are an authority in knowing the worth of particular items in Beaumont and San Bernardino County neighborhoods. The sales comparison approach to value is commonly given the most importance when an appraisal is for a real estate 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 property yields is taken into consideration along with other rents in the area for comparable properties to give an indicator of the current value.
Arriving at a Value Conclusion
Analyzing the data from all approaches, the appraiser is then ready to state an estimated market value for the property at hand. The estimate of value on the appraisal report is not always the final sales price even though it is likely the best indication of a property's valueThere 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 the event they had to put the property on the market again. The bottom line is, an appraiser from 1st Quality Appraisals, Inc will guarantee you discover the most fair and balanced property value, so you can make profitable real estate decisions.