What Are the Parts of an Appraisal?
Acquiring a house is the biggest transaction some will ever make. Whether it's where you raise your family, an additional vacation property or one of many rentals, purchasing real property is a detailed financial transaction that requires multiple people working in concert to pull it all off.
The majority of the participants are very familiar. The real estate agent is the most recognizable entity in the transaction. Next, the mortgage company provides the financial capital required to fund the exchange. And ensuring all areas of the exchange are completed and that a clear title transfers from the seller to the buyer is the title company.
So, who makes sure the value of the property is consistent with 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 All City Appraisal will ensure, you as an interested party, are informed.
Inspecting the subject property
To ascertain an accurate status of the property, it's our duty to first complete a thorough inspection. We must actually see aspects of the property, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really exist and are in the shape a typical buyer would expect them to be. To make sure the stated square footage is accurate and illustrate the layout of the home, the inspection often includes creating a sketch of the floorplan. Most importantly, we look for any obvious amenities - or defects - that would affect the value of the house.
Back at the office, we use two or three approaches to determining the value of the property: sales comparison and, in the case of a rental property, an income approach.
This is where the appraiser gathers information on local building costs, the cost of labor and other factors to ascertain how much it would cost to construct a property comparable to the one being appraised. This value usually sets the maximum on what a property would sell for. The cost approach is also the least used method.
Analyzing Comparable Sales
Appraisers become very familiar with the subdivisions in which they work. They innately understand the value of specific features to the residents of that area. Then, the appraiser researches recent transactions in the vicinity and finds properties which are 'comparable' to the subject at hand. Using knowledge of the value of certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or additional storage space, we adjust the comparable properties so that they are more accurately in line with the features of subject.
In the end, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. When it comes to valuing features of homes in Woodland Hills and Los Angeles, All City Appraisal can't be beat. This approach to value is usually awarded the most consideration when an appraisal is for a real estate exchange.
Valuation Using the Income Approach
A third way of valuing approach to value is sometimes applied when a neighborhood has a reasonable number of renter occupied properties. In this scenario, the amount of income the real estate generates is factored in with other rents in the area for comparable properties to determine the current value.
Coming Up With The Final Value
Analyzing the data from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the property at hand. The estimate of value on the appraisal report is not necessarily what's being paid for the property even though it is likely the best indication of a property's valuePrices 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 the property is actually worth. The bottom line is, an appraiser from All City Appraisal will guarantee you attain the most accurate property value, so you can make the most informed real estate decisions.