What Is an Appraisal?
A home purchase is the most important transaction some people could ever encounter. It doesn't matter if a main residence, a second vacation property or one of many rentals, the purchase of real property is a detailed financial transaction that requires multiple parties to see it through.
It's likely you are familiar with the parties taking part in the transaction. The real estate agent is the most recognizable person in the transaction. Next, the bank provides the money needed to bankroll the exchange. The title company ensures that all aspects of the exchange are completed and that the title is clear to transfer from the seller to the purchaser.
So, what party makes sure the value of the real estate is in line with the amount being paid? 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 Property Valuation Group will ensure, you as an interested party, are informed.
Inspecting the subject property
Our first task at Property Valuation Group is to inspect the property to determine its true status. We must see features 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 condition a typical buyer would expect them to be. To make sure the stated size of the property is accurate and illustrate the layout of the house, the inspection often entails creating a sketch of the floorplan. Most importantly, the appraiser looks for any obvious features - or defects - that would affect the value of the property.
Once the site has been inspected, 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.
This is where we gather information on local building costs, the cost of labor and other elements to derive how much it would cost to construct a property comparable to the one being appraised. This estimate often sets the upper limit on what a property would sell for. It's also the least used method.
Paired Sales Analysis
Appraisers become very familiar with the subdivisions in which they work. They thoroughly understand the value of certain features to the people of that area. Then, the appraiser looks up recent transactions in the area and finds properties which are 'comparable' to the subject being appraised. Using knowledge of the value of certain items such as upgraded appliances, extra bathrooms, additional living area, quality of construction, lot size, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject.
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. When it comes to putting a value on features of homes in Ferndale and Oakland, Property Valuation Group is second to none. This approach to value is commonly awarded the most importance when an appraisal is for a home purchase.
Valuation Using the Income Approach
A third method of valuing a property is sometimes used when an area has a measurable number of renter occupied properties. In this situation, the amount of revenue the real estate yields is factored in with other rents in the area for comparable properties to derive the current value.
The Bottom Line
Analyzing the data from all approaches, the appraiser is then ready to put down an estimated market value for the property in question. The estimate of value on the appraisal report is not always the final sales price 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 typically used as a guideline for lenders who don't want to loan a buyer more money than they could get back in the event they had to sell the property again. The bottom line is, an appraiser from Property Valuation Group will help you attain the most fair and balanced property value, so you can make profitable real estate decisions.