Comprehending Appraisals

Their home's purchase can be the most serious investment some will ever make. Whether it's a main residence, an additional vacation property or an investment, purchasing real property is a complex financial transaction that requires multiple parties to make it all happen.

Practically all the people involved are very familiar. The most recognizable person in the transaction is the real estate agent. Then, the bank provides the financial capital required to bankroll the deal. And ensuring all aspects of the sale are completed and that the title is clear to pass from the seller to the purchaser is the title company.

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

So, what party is responsible for making sure the real estate is worth the purchase price? This is where the appraiser comes in. 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 Good Appraisal Services, Inc. will ensure, you as an interested party, are informed.

The inspection is where an appraisal begins

To ascertain the true status of the property, it's our responsibility to first perform a thorough inspection. We must actually view aspects of the property, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they truly are present 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 correct and conveying the layout of the property. Most importantly, we identify any obvious features - or defects - that would affect the value of the property.

Once the site has been inspected, we use two or three approaches to determining the value of the property: paired sales analysis and, in the case of a rental property, an income approach.

Replacement Cost

This is where we analyze information on local construction costs, the cost of labor and other elements to derive how much it would cost to build a property similar to the one being appraised. This estimate 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 appraise. They thoroughly understand the value of particular features to the residents of that area. Then, the appraiser looks up recent transactions in the vicinity and finds properties which are 'comparable' to the subject 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 adjust the comparable properties so that they more accurately portray the features of subject property.

Say, for example, the comparable has an extra half bath that the subject does not, the appraiser may subtract the value of that half bath from the sales price of the comparable home.
But, 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.

A valid estimate 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 putting a value on features of homes in Riverside and Riverside, Good Appraisal Services, Inc. can't be beat. The sales comparison approach to value is most often 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 an area has a measurable number of renter occupied properties. In this situation, the amount of revenue the property produces is taken into consideration along with other rents in the area for comparable properties to determine the current value.

The Bottom Line

Examining the data from all applicable approaches, the appraiser is then ready to document an estimated market value for the property at hand. The estimate of value at the bottom of the appraisal report is not always the final sales price even though it is likely the best indication of a property's valueThere are always mitigating factors such as the seller's desire to get out of the property, 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. The bottom line is, an appraiser from Good Appraisal Services, Inc. will help you get the most accurate property value, so you can make the most informed real estate decisions.