What goes into an appraisal?One's home purchase is the most serious transaction some of us will ever encounter. It doesn't matter if it's where you raise your family, a seasonal vacation property or an investment, purchasing real property is a detailed transaction that requires multiple parties to make it all happen.
You're probably familiar with the parties having a role in the transaction. The real estate agent is the most known face in the exchange. Then, the lender provides the financial capital required to finance the exchange. The title company makes sure that all requirements of the transaction are completed and that a clear title transfers from the seller to the purchaser.
So what party makes sure the property is consistent with the purchase price? This is where the appraiser comes in. We provide an unbiased opinion of what a buyer could expect to pay - or a seller receive - for a parcel of real estate, where both buyer and seller are informed parties. A professional California licensed appraiser from Park Place Appraisal Services 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 features hands on, such as the number of bedrooms and bathrooms, the location, living areas, etc., to ensure they really are present and are in the shape a typical buyer would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is correct and conveying the layout of the property. Most importantly, we identify any obvious amenities - or defects - that would have an impact on the value of the property.
Once the site has been inspected, an appraiser employs two or three approaches when determining the value of the property: paired sales analysis and, in the case of a rental property, an income approach.
Cost ApproachHere, the appraiser gathers information on local construction costs, the cost of labor and other factors to ascertain how much it would cost to build a property similar to the one being appraised. This value usually sets the upper limit on what a property would sell for. The cost approach is also the least used predictor of value.
Paired Sales AnalysisAppraisers become very familiar with the communities in which they appraise. We innately understand the value of certain features to the residents of that area. Then, the appraiser researches recent sales in the vicinity and finds properties which are 'comparable' to the home in question. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, extra bathrooms or bedrooms, or quality of construction, we adjust the comparable properties so that they more accurately portray the features of subject property.
Valuation Using the Income ApproachA third way of valuing real estate is sometimes applied when a neighborhood has a measurable number of rental properties. In this case, the amount of income the property produces is taken into consideration along with other rents in the area for comparable properties to give an indicator of the current value.
Coming Up With the Final ValueExamining the data from all approaches, the appraiser is then ready to document an estimated market value for the property in question. The estimate of value at the bottom of the appraisal report is not always 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. Depending on the specific 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 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. Here's what it all boils down to: An appraiser from Park Place Appraisal Services will help you attain the most fair and balanced property value, so you can make the most informed real estate decisions.