Decoding the Appraisal Process
Their home's purchase can be the largest transaction many of us could ever consider. It doesn't matter if where you raise your family, a seasonal vacation home or an investment, purchasing real property is a detailed transaction that requires multiple people working in concert to see it through.
You're likely to be familiar with the parties taking part in the transaction. The most known person in the transaction is the real estate agent. Then, the lender provides the money needed to finance the transaction. And the title company sees to it that all areas of the exchange are completed and that a clear title transfers to the buyer from the seller.
So, what party makes sure the value of the real estate is in line with the purchase price? In comes the appraiser. 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 licensed, certified, professional appraiser from Instant Certified Appraisals will ensure, you as an interested party, are informed.
The inspection is where an appraisal starts
To determine the true status of the property, it's our responsibility to first conduct a thorough inspection. We must see features first hand, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed exist and are in the shape 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 the property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.
Here, the appraiser pulls information on local construction costs, the cost of labor and other factors to determine how much it would cost to build a property nearly identical to the one being appraised. This estimate commonly sets the maximum on what a property would sell for. It's also the least used predictor of value.
Appraisers become very familiar with the communities in which they work. They innately understand the value of specific features to the people of that area. Then, the appraiser researches recent transactions 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 fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, we adjust the comparable properties 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. When it comes to knowing the true value of features of homes in Scottsdale and Maricopa, Instant Certified Appraisals is your local authority. The sales comparison approach to value is usually given the most importance when an appraisal is for a home exchange.
Valuation Using the Income Approach
A third method of valuing a property is sometimes employed when a neighborhood has a reasonable number of rental properties. In this case, the amount of income the real estate yields is taken into consideration along with income produced by similar properties to determine the current value.
The Bottom Line
Combining information from all approaches, the appraiser is then ready to put down an estimated market value for the property in question. The estimate of value at the bottom of the appraisal report is not necessarily what's being paid for the property even though it is likely the best indication of a property's valueIt'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 the property is actually worth. Here's what it all boils down to, an appraiser from Instant Certified Appraisals will help you attain the most accurate property value, so you can make wise real estate decisions.