Real Property Appraisals: A Primer
A home purchase can be the most important financial decision most of us will ever encounter. It doesn't matter if a primary residence, an additional vacation property or one of many rentals, the purchase of real property is a complex financial transaction that requires multiple parties to see it through.
The majority of the parties participating are quite familiar. The real estate agent is the most known face in the exchange. Next, the mortgage company provides the money required to bankroll the exchange. And ensuring all areas of the exchange are completed and that the title is clear to pass from the seller to the purchaser is the title company.
So, what party makes sure the value of the real estate is consistent with the amount being paid? This is where the appraiser comes in. We provide an unbiased estimate 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 determine an accurate status of the property, it's our responsibility to first conduct a thorough inspection. We must physically view features, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly are present and are in the shape a typical person would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is accurate and conveying 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 the property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.
Here, we pull 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. The cost approach is also the least used predictor of value.
Appraisers are intimately familiar with the neighborhoods in which they work. They innately understand the value of certain features to the people of that area. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are 'comparable' to the property being appraised. 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 portray 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. At Casa Grande Appraisal Service, we are an authority in knowing the worth of real estate features in Casa Grande and Maricopa County neighborhoods. This approach to value is commonly awarded the most consideration when an appraisal is for a real estate exchange.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - we may use an additional way of valuing a property. In this situation, the amount of revenue the real estate yields is factored in with other rents in the area for comparable properties to derive the current value.
The Bottom Line
Analyzing the data from all applicable 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 may not be the price at which the property closes. It'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 typically used 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 Casa Grande Appraisal Service will help you attain the most fair and balanced property value, so you can make wise real estate decisions.