What goes into an appraisal?A home purchase is the biggest investment many of us might ever make. Whether it's a main residence, a seasonal vacation home or one of many rentals, purchasing real property is a detailed transaction that requires multiple people working in concert to see it through.
The majority of the participants are very familiar. The most known entity in the exchange is the real estate agent. Next, the bank provides the financial capital needed to fund the deal. Ensuring all areas of the exchange are completed and that a clear title passes to the buyer from the seller is the title company.
So who makes sure the value of the real estate is in line with the amount being paid? In comes the appraiser. We provide an unbiased opinion of what a buyer could expect to pay - or a seller receive - for a property, where both buyer and seller are informed parties. A professional California licensed appraiser from Seaview Real Estate will ensure you as an interested party are informed.
Appraisals begin with the inspectionTo determine 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, and so on, to ensure they really exist and are in the shape a reasonable buyer would expect them to be. The inspection often includes a sketch of the property, 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 property.
Back at the office, an appraiser employs two or three approaches when determining the value of the property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.
Replacement CostThis is where we gather information on local building costs, the cost of labor and other elements to derive how much it would cost to construct a property nearly identical to the one being appraised. This figure often sets the upper limit on what a property would sell for. It's also the least used method.
Paired Sales AnalysisAppraisers become very familiar with the communities in which they work. We innately understand the value of particular features to the people of that area. Then, the appraiser researches recent transactions in close proximity to the subject and finds properties which are 'comparable' to the home 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 adjust the comparable properties so that they more accurately match the features of subject property.
Valuation Using the Income ApproachA third method of valuing approach to value is sometimes used when an area has a reasonable number of rental properties. In this case, the amount of income the real estate produces is taken into consideration along with income produced by neighboring properties to determine the current value.
Arriving at a Value ConclusionExamining the data from all approaches, the appraiser is then ready to document an estimated market value for the property in question. Note: While this amount is probably the strongest indication of what a property would sell for in an open market, it probably will not be the final sales price. There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust the final price up or down. Regardless, the appraised value is typically employed as a guideline for lenders who don't want to loan a buyer more money than the property would likely sell for in an open marketplace. It all comes down to this: An appraiser from Seaview Real Estate will guarantee you discover the most fair and balanced property value, so you can make the most informed real estate decisions.