Home Appraisals: A PrimerOne's home purchase can be the most significant investment most of us may ever make. It doesn't matter if it's a primary residence, a seasonal vacation property or one of many rentals, purchasing real property is a complex financial transaction that requires multiple people working in concert to see it through.
Practically all the participants are quite familiar. The real estate agent is the most recognizable person in the transaction. Then, the lender provides the money needed to finance the exchange. The title company ensures that all aspects of the transaction are completed and that the title is clear to transfer from the seller to the buyer.
So who makes sure the property is consistent with the amount being paid? In comes 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 professional California licensed appraiser from MacBride Appraisal will ensure you as an interested party are informed.
Inspecting the subject propertyTo determine the true status of the property, it's our duty 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 truly are there and are in the shape a reasonable buyer would expect them to be. The inspection often includes a sketch of the floor plan, ensuring the square footage is proper 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 property.
Next, after the inspection, 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 CostHere, we pull information on local construction costs, the cost of labor and other elements to calculate how much it would cost to build a property comparable to the one being appraised. This value commonly sets the maximum on what a property would sell for. It's also the least used method.
Sales ComparisonAppraisers can tell you a lot about the neighborhoods in which they work. We 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 at hand. By assigning a dollar value to certain items such as upgraded appliances, extra bathrooms, an additional living area, quality of construction, lot size, we adjust the comparable properties so that they more accurately portray the features of subject.
Valuation Using the Income ApproachIn the case of income producing properties - rental houses for example - we may use a third way of valuing a property. In this situation, the amount of revenue the real estate produces is factored in with other rents in the area for comparable properties to derive the current value.
The Bottom LineCombining information from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. The estimate of value at the bottom of the appraisal report is not necessarily what's being paid for the property even though it is likely the best indication of what a property could sell for in an open market. It's not uncommon for prices to 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 used 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. The bottom line is: An appraiser from MacBride Appraisal will help you attain the most fair and balanced property value, so you can make profitable real estate decisions.