Understanding Appraisals

Purchasing a house can be the largest financial decision most people might ever make. It doesn't matter if a primary residence, an additional vacation property or an investment, the purchase of real property is a detailed financial transaction that requires multiple parties to make it all happen.

You're likely to be familiar with the parties taking part in the transaction. The most known entity in the transaction is the real estate agent. Then, the lender provides the money necessary to bankroll the transaction. The title company makes sure that all aspects of the sale are completed and that the title is clear to pass to the buyer from the seller.

To learn more about appraising, click here to see a short video or call us today to talk about your specific property.

So, who's responsible for making sure the real estate is worth the purchase price? In comes the appraiser. We provide an unbiased opinion 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 Casa Grande Appraisal Service will ensure, you as an interested party, are informed.

The inspection is where an appraisal begins

Our first responsibility at Casa Grande Appraisal Service is to inspect the property to determine its true status. We must actually view features, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they indeed are there and are in the shape a typical buyer would expect them to be. To ensure the stated square footage is accurate and describe the layout of the property, the inspection often requires creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious amenities - or defects - that would affect the value of the house.

Following the inspection, an appraiser uses two or three approaches to determining the value of real property: sales comparison and, in the case of a rental property, an income approach.

Cost Approach

This is where the appraiser gathers information on local building costs, the cost of labor and other factors to calculate how much it would cost to replace the property being appraised. This estimate usually sets the maximum on what a property would sell for. It's also the least used method.

Paired Sales Analysis

Appraisers can tell you a lot about the communities in which they appraise. They innately understand the value of certain features to the people of that area. Then, the appraiser looks up recent sales in close proximity to the subject and finds properties which are 'comparable' to the real estate at hand. By assigning a dollar value to certain items such as square footage, extra 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.

  • Say, for example, the comparable property has a fireplace and the subject does not, the appraiser may subtract the value of a fireplace from the sales price of the comparable home.
  • In the case where the subject has something such as an extra half bath that a comparable doesn't have, the appraiser might add the value of that bath to the comparable property.

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. At Casa Grande Appraisal Service, we are an authority when it comes to knowing the value of particular items in Casa Grande and Maricopa County neighborhoods. This approach to value is most often awarded the most importance when an appraisal is for a home exchange.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - the appraiser may use an additional approach to value. In this case, the amount of income the real estate generates is taken into consideration along with income produced by nearby properties to derive the current value.

Putting It All Together

Analyzing the data from all applicable approaches, the appraiser is then ready to put down an estimated market value for the property in question. The estimate of value on the appraisal report is not necessarily what's being paid for the property even though it is likely the best indication of what a property is worth. Prices can always be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. 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 Casa Grande Appraisal Service will guarantee you attain the most fair and balanced property value, so you can make wise real estate decisions.