Home Appraisals: A Primer
Acquiring a house is the biggest financial decision some people may ever encounter. Whether it's a main residence, a seasonal vacation property or one of many rentals, the purchase of real property is a complex transaction that requires multiple parties to make it all happen.
The majority of the parties involved are very familiar. The real estate agent is the most recognizable person in the exchange. Next, the bank provides the financial capital needed to bankroll the exchange. The title company ensures that all details of the sale are completed and that the title is clear to transfer from the seller to the purchaser.
So, who makes sure the real estate is worth the purchase price? This is where the appraiser comes in. We provide an unbiased opinion of what a buyer might expect to pay — or a seller receive — for a parcel of real estate, 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.
Inspecting the subject property
To ascertain the true status of the property, it's our duty to first conduct 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 reasonable buyer would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is correct and conveying the layout of the property. Most importantly, the appraiser identifies any obvious features - or defects - that would have an impact on the value of the house.
Next, after the inspection, an appraiser uses two or three approaches to determining the value of the property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.
Here, we analyze information on local construction costs, labor rates and other elements to figure out how much it would cost to replace the property being appraised. This estimate commonly sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.
Paired Sales Analysis
Appraisers get to know the neighborhoods in which they work. They innately understand the value of particular features to the people of that area. Then, the appraiser researches recent transactions in the neighborhood and finds properties which are 'comparable' to the subject at hand. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject property.
Once all necessary adjustments have been made, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At Young Real Estate Appraisals, we are experts when it comes to knowing the value of particular items in Palm Desert and Riverside County neighborhoods. This approach to value is usually awarded the most consideration when an appraisal is for a home sale.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - the appraiser may use a third approach to value. In this scenario, the amount of income the real estate produces is taken into consideration along with income produced by neighboring properties to give an indicator of the current value.
Analyzing the data from all approaches, the appraiser is then ready to stipulate an estimated market value for the property at hand. It is important to note that while this amount is probably the strongest indication of what a house is worth, it probably will not be the final sales price. 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.But the appraised value is typically employed as a guideline for lenders who don't want to loan a buyer more money than they could recover in the event they had to put the property on the market again. It all comes down to this, an appraiser from Young Real Estate Appraisals will guarantee you get the most fair and balanced property value, so you can make wise real estate decisions.