Decoding the Appraisal Process
Acquiring a house is the largest financial decision many of us could ever consider. It doesn't matter if where you raise your family, a seasonal vacation home or an investment, the purchase of real property is a detailed financial transaction that requires multiple people working in concert to pull it all off.
You're likely to be familiar with the parties having a role in the transaction. The most known entity in the exchange is the real estate agent. Then, the bank provides the financial capital required to fund the deal. And ensuring all requirements of the transaction are completed and that the title is clear to transfer to the buyer from the seller is the title company.
So, what party is responsible for making sure the value of the property is in line with the purchase price? In comes the appraiser. We provide an unbiased opinion of what a buyer could 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.
Inspecting the subject property
To ascertain the true status of the property, it's our responsibility to first perform a thorough inspection. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they truly exist and are in the shape a typical buyer would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is proper and illustrating the layout of the property. Most importantly, the appraiser looks for any obvious amenities - or defects - that would have an impact on the value of the house.
Back at the office, we use two or three approaches to determining the value of real property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.
This is where we analyze information on local construction costs, the cost of labor and other elements to ascertain how much it would cost to replace the property being appraised. This value often sets the upper limit on what a property would sell for. The cost approach is also the least used method.
Paired Sales Analysis
Appraisers get to know the neighborhoods in which they work. They thoroughly understand the value of particular features to the homeowners of that area. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are 'comparable' to the subject in question. By assigning a dollar value to 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 more accurately match the features of subject.
Once all necessary adjustments have been made, 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 when it comes to knowing the worth of real estate features in Casa Grande and Maricopa County neighborhoods. This approach to value is typically given the most importance when an appraisal is for a real estate purchase.
Valuation Using the Income Approach
A third method of valuing real estate is sometimes employed when a neighborhood has a measurable number of renter occupied properties. In this case, the amount of revenue the real estate generates is taken into consideration along with income produced by nearby properties to give an indicator of the current value.
The Bottom Line
Examining the data from all approaches, the appraiser is then ready to state an estimated market value for the subject property. Note: While this amount is probably the best indication of what a house is worth, it may 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 an offer or listing price 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 they could recover in case they had to sell the property again. Here's what it all boils down to, an appraiser from Casa Grande Appraisal Service will guarantee you get the most accurate property value, so you can make profitable real estate decisions.