Real Estate Appraisals: A Primer
Their home's purchase can be the most serious investment many of us may ever make. It doesn't matter if where you raise your family, a seasonal vacation home or an investment, the purchase of real property is a complex transaction that requires multiple parties to pull it all off.
Practically all the participants are very familiar. The most known face in the exchange is the real estate agent. Next, the mortgage company provides the money required to bankroll the transaction. The title company ensures that all requirements of the exchange are completed and that a clear title passes to the buyer from the seller.
So, who makes sure the value of the property is in line 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 Casa Grande Appraisal Service will ensure, you as an interested party, are informed.
Appraisals begin with the property inspection
Our first task at Casa Grande Appraisal Service 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, and so on, to ensure they indeed exist and are in the condition a typical buyer would expect them to be. To ensure the stated square footage is accurate and illustrate the layout of the house, the inspection often includes creating a sketch of the floorplan. Most importantly, we identify any obvious features - or defects - that would have an impact on the value of the house.
Following the inspection, we use two or three approaches to determining the value of real property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.
This is where we gather information on local building costs, labor rates and other factors to calculate how much it would cost to construct a property nearly identical to the one being appraised. This estimate usually 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 neighborhoods in which they appraise. They innately understand the value of certain features to the homeowners of that area. Then, the appraiser looks up recent transactions in the neighborhood and finds properties which are 'comparable' to the real estate at hand. Using knowledge of the value of certain items such as square footage, additional bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject property.
In the end, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At Casa Grande Appraisal Service, we are experts in knowing the value of particular items in Tempe and Maricopa County neighborhoods. The sales comparison approach to value is usually given the most importance when an appraisal is for a real estate purchase.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - the appraiser may use an additional way of valuing real estate. In this situation, the amount of revenue the property yields is factored in with other rents in the area for comparable properties to determine the current value.
Arriving at a Value Conclusion
Combining information from all approaches, the appraiser is then ready to document an estimated market value for the property at hand. It is important to note that while the appraised value is probably the most accurate indication of what a house is worth, it may not be the final sales price. There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust the final price up or down. Regardless, 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 Casa Grande Appraisal Service will guarantee you attain the most accurate property value, so you can make the most informed real estate decisions.