A home purchase is the most important investment some of us will ever encounter. It doesn't matter if it's a primary residence, a second vacation home or a rental fixer upper, the purchase of real property is an involved transaction that requires multiple parties to pull it all off.
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Most of the participants are quite familiar. The most recognizable face in the transaction is the real estate agent. Then, the mortgage company provides the money needed to finance the exchange. Ensuring all requirements of the exchange are completed and that the title is clear to pass to the buyer from the seller is the title company.
So what party makes sure the value of the property is consistent with the purchase price? 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 parcel of real estate, where both buyer and seller are informed parties. A professional California licensed appraiser from Appraisal Care will ensure you as an interested party are informed.
Appraisals start with the property inspection
Our first responsibility at Appraisal Care 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 are present and are in the condition a typical buyer would expect them to be. The inspection often includes a sketch of the floor plan, ensuring the square footage is correct and illustrating the layout of the property. Most importantly, we look for any obvious amenities - or defects - that would have an impact on the value of the property.
Following the inspection, an appraiser employs two or three approaches when determining the value of real property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.
Cost Approach
This is where the appraiser analyzes information on local building costs, the cost of labor and other elements to determine how much it would cost to construct a property nearly identical to the one being appraised. This value often sets the upper limit on what a property would sell for. It's also the least used method.
Analyzing Comparable Sales
Appraisers can tell you a lot about the subdivisions in which they work. We thoroughly understand the value of particular features to the homeowners of that area. Then, the appraiser looks up recent sales in the vicinity and finds properties which are 'comparable' to the property being appraised. By assigning a dollar value to certain items such as fireplaces, room layout, appliance upgrades, extra bathrooms or bedrooms, or quality of construction, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject.
Say, for example, the comparable property has a storm shelter and the subject doesn't, the appraiser may subtract the value of a storm shelter from the sales price of the comparable.
If the subject property has an extra half-bathroom and the comparable does not, the appraiser might add a certain amount to the comparable property.
At Appraisal Care, we are experts in knowing the value of real estate features in Long Beach and Los Angeles and Orange County neighborhoods. The sales comparison approach to value is usually awarded the most weight when an appraisal is for a home purchase.
Valuation Using the Income Approach
A third way of valuing real estate is sometimes used when an area has a measurable number of renter occupied properties. In this case, the amount of income the property yields is factored in with income produced by nearby properties to determine the current value.
Reconciliation
Analyzing the data from all approaches, the appraiser is then ready to stipulate an estimated market value for the property at hand. Note: While the appraised value is probably the most accurate indication of what a property is worth, it probably will not be the price at which the property closes. Depending on the individual situations of the buyer or seller, their level of urgency or a buyer's desire for that exact property, the closing price of a home can always be driven up or down. But the appraised value is typically employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. At the end of the day: An appraiser from Appraisal Care will guarantee you attain the most accurate property value, so you can make wise real estate decisions.
