A Description of the Appraisal Process
Purchasing a home can be the most important financial decision many of us will ever encounter. It doesn't matter if a main residence, a second vacation property or a rental fixer upper, the purchase of real property is a detailed financial transaction that requires multiple people working in concert to make it all happen.
It's likely you are familiar with the parties taking part in the transaction. The real estate agent is the most recognizable face in the transaction. Next, the mortgage company provides the financial capital required to finance the exchange. And the title company ensures that all areas of the transaction are completed and that a clear title transfers from the seller to the buyer.
So, who's responsible for making sure the real estate is worth the purchase price? In comes the appraiser. We provide an unbiased opinion of what a buyer might expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Young Real Estate Appraisals will ensure, you as an interested party, are informed.
The inspection is where an appraisal begins
To ascertain an accurate status of the property, it's our duty to first perform a thorough inspection. We must actually view aspects of the property, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they really are there and are in the condition a reasonable person would expect them to be. To ensure the stated square footage is accurate and illustrate the layout of the home, the inspection often requires creating a sketch of the floorplan. Most importantly, we identify any obvious amenities - or defects - that would have an impact on the value of the property.
Next, after the inspection, 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.
Here, we pull information on local building costs, the cost of labor and other factors to ascertain how much it would cost to replace the property being appraised. This figure usually sets the upper limit on what a property would sell for. It's also the least used predictor of value.
Appraisers can tell you a lot about the neighborhoods in which they work. They thoroughly understand the value of specific features to the homeowners of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the subject being appraised. Using knowledge of the value of certain items such as upgraded appliances, additional bathrooms, additional living area, quality of construction, lot size, we adjust the comparable properties so that they are more accurately in line with the features of subject.
A valid 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 Young Real Estate Appraisals, we are an authority in knowing the value of particular items in Palm Desert and Riverside County neighborhoods. This approach to value is typically awarded the most importance when an appraisal is for a home purchase.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - we may use an additional approach to value. In this situation, the amount of income the real estate yields is factored in with income produced by similar 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 subject property. Note: While the appraised value is probably the most accurate indication of what a property is worth, it may not be the price at which the property closes. Depending on the individual circumstances of the buyer or seller, their level of urgency or a buyer's desire for that exact property, the closing price of a home can always be driven up or down.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. It all comes down to this, an appraiser from Young Real Estate Appraisals will guarantee you attain the most accurate property value, so you can make profitable real estate decisions.