What Are the Components of an Appraisal?
Acquiring real estate is the largest investment most will ever make. Whether it's a primary residence, an additional vacation property or an investment, purchasing 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 taking part in the transaction. The real estate agent is the most familiar person in the transaction. Next, the bank provides the money necessary to finance the transaction. The title company ensures that all requirements of the transaction are completed and that the title is clear to transfer to the buyer from the seller.
So, who's responsible for making sure the property is worth the amount being paid? In comes the appraiser. 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 Good Appraisal Services, Inc. will ensure, you as an interested party, are informed.
Appraisals begin with the property inspection
Our first task at Good Appraisal Services, Inc. is to inspect the property to ascertain its true status. We must see aspects of the property hands on, 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 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, we identify any obvious features - or defects - that would affect the value of the house.
Once the site has been inspected, an appraiser uses two or three approaches to determining the value of the property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.
This is where we use information on local building costs, labor rates and other factors to ascertain how much it would cost to build a property similar to the one being appraised. This value often sets the maximum on what a property would sell for. The cost approach is also the least used method.
Paired Sales Analysis
Appraisers can tell you a lot about the communities in which they appraise. They thoroughly understand the value of certain features to the homeowners of that area. Then, the appraiser researches recent transactions in the neighborhood and finds properties which are 'comparable' to the subject at hand. By assigning a dollar value to certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or extra storage space, we add or subtract from each comparable's sales price so that they more accurately match the features of subject.
A true estimate of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. At Good Appraisal Services, Inc., we are an authority in knowing the worth of particular items in Riverside and Riverside County neighborhoods. This approach to value is most often awarded the most importance when an appraisal is for a home purchase.
Valuation Using the Income Approach
A third method of valuing a property is sometimes applied when a neighborhood has a reasonable number of renter occupied properties. In this scenario, the amount of revenue the real estate generates is factored in with other rents in the area for comparable properties to determine the current value.
Analyzing the data from all applicable approaches, the appraiser is then ready to document an estimated market value for the subject property. Note: While this amount is probably the strongest 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 often used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. Here's what it all boils down to, an appraiser from Good Appraisal Services, Inc. will guarantee you attain the most fair and balanced property value, so you can make profitable real estate decisions.