What Are the Parts of an Appraisal?
Their home's purchase is the most important financial decision many people will ever consider. It doesn't matter if a primary residence, an additional vacation property or a rental fixer upper, purchasing real property is a complex transaction that requires multiple people working in concert to see it through.
You're probably familiar with the parties taking part in the transaction. The most known person in the exchange is the real estate agent. Then, the mortgage company provides the money necessary to fund the exchange. And the title company sees to it that all requirements of the exchange are completed and that the title is clear to transfer to the buyer from the seller.
So, who makes sure the value of the property 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 Premier Appraisal of SoCal will ensure, you as an interested party, are informed.
Inspecting the subject property
To ascertain an accurate status of the property, it's our duty to first conduct a thorough inspection. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they indeed are present and are in the condition a typical buyer would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is accurate and conveying the layout of the property. Most importantly, we identify any obvious features - or defects - that would affect the value of the property.
After the inspection, we use two or three approaches to determining the value of real property: sales comparison and, in the case of a rental property, an income approach.
Here, we gather information on local building costs, the cost of labor and other factors to determine how much it would cost to build a property comparable to the one being appraised. This value commonly sets the upper limit on what a property would sell for. It's also the least used method.
Appraisers get to know the subdivisions in which they work. They thoroughly understand the value of particular features to the residents of that area. Then, the appraiser researches recent sales in the neighborhood and finds properties which are 'comparable' to the property at hand. Using knowledge of the value of certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or extra storage space, we adjust the comparable properties so that they more accurately portray 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. When it comes to knowing the true value of features of homes in Mission Viejo and Orange, Premier Appraisal of SoCal is second to none. The sales comparison approach to value is typically given the most importance when an appraisal is for a home sale.
Valuation Using the Income Approach
A third way of valuing approach to value is sometimes employed when an area has a measurable number of rental properties. In this situation, the amount of revenue the property produces is taken into consideration along with income produced by comparable properties to derive the current value.
Arriving at a Value Conclusion
Analyzing the data from all applicable approaches, the appraiser is then ready to state an estimated market value for the subject property. Note: While the appraised value is probably the most reliable indication of what a property is worth, it probably will not be the price at which the property closes. There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust the final price up or down. 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. It all comes down to this, an appraiser from Premier Appraisal of SoCal will help you attain the most accurate property value, so you can make wise real estate decisions.