A home purchase is the most important financial decision many may ever encounter. Whether it's where you raise your family, a second vacation home or an investment, the purchase of real property is an involved financial transaction that requires multiple people working in concert to see it through.
The majority of the people involved are quite familiar. The real estate agent is the most known entity in the exchange. Next, the lender provides the financial capital necessary to fund the deal. And ensuring all aspects of the transaction are completed and that the title is clear to transfer to the buyer from the seller is the title company.
So, who's responsible for making sure the property is worth the amount being paid? This is where you meet 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 home inspection
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 really are present and are in the condition 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 affect the value of the property.
Once the site has been inspected, an appraiser uses 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.
Here, the appraiser gathers information on local construction costs, labor rates and other elements to calculate how much it would cost to replace the property being appraised. This value often sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.
Analyzing Comparable Sales
Appraisers can tell you a lot about the communities in which they work. They innately understand the value of certain features to the residents of that area. Then, the appraiser looks up recent sales 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 remodeled rooms, types of flooring, energy efficient items, patios and porches, or additional storage space, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject.
After all differences have been accounted for, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At Good Appraisal Services, Inc., we are experts in knowing the worth of real estate features in Riverside and Riverside County neighborhoods. The sales comparison approach to value is usually awarded the most weight when an appraisal is for a home sale.
Valuation Using the Income Approach
A third method of valuing a house is sometimes applied when an area has a reasonable number of rental properties. In this situation, the amount of revenue the real estate produces is taken into consideration along with income produced by neighboring properties to give an indicator of the current value.
Putting It All Together
Examining the data from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. It is important to note that while the appraised value is probably the best indication of what a property is worth, it may not be the price at which the property closes. Prices can always be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. Regardless, the appraised value is often employed as a guideline for lenders who don't want to loan a buyer more money than they could get back in case they had to sell the property again. The bottom line is, an appraiser from Good Appraisal Services, Inc. will guarantee you attain the most accurate property value, so you can make wise real estate decisions.