Understanding the Appraisal Process
Their home's purchase can be the most serious investment most might ever encounter. It doesn't matter if a primary residence, an additional vacation home or an investment, purchasing real property is a complex transaction that requires multiple parties to see it through.
Most of the parties involved are quite familiar. The most recognizable face in the exchange is the real estate agent. Then, the lender provides the money required to finance the transaction. And ensuring all aspects of the transaction are completed and that a clear title transfers to the buyer from the seller is the title company.
So, what party is responsible for making sure the property is worth the purchase price? This is where you meet the appraiser. We provide an unbiased estimate 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 licensed, certified, professional appraiser from Collard Appraisal Group, Inc. will ensure, you as an interested party, are informed.
Inspecting the subject property
Our first responsibility at Collard Appraisal Group, Inc. is to inspect the property to determine its true status. 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 there and are in the condition a typical person would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is proper and conveying the layout of the property. Most importantly, we look for any obvious features - 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 analyze information on local construction costs, labor rates and other elements to figure out how much it would cost to build a property comparable to the one being appraised. This figure usually sets the upper limit on what a property would sell for. The cost approach is also the least used method.
Paired Sales Analysis
Appraisers get to know the neighborhoods in which they work. They innately understand the value of certain features to the homeowners of that area. Then, the appraiser looks up recent sales in close proximity to the subject and finds properties which are 'comparable' to the subject being appraised. By assigning a dollar value to certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or extra storage space, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject.
An opinion of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. At Collard Appraisal Group, Inc., we are an authority in knowing the value of particular items in Palmdale and Los Angeles County neighborhoods. The sales comparison approach to value is commonly given the most weight when an appraisal is for a real estate exchange.
Valuation Using the Income Approach
A third way of valuing real estate is sometimes employed when an area has a measurable number of renter occupied properties. In this situation, the amount of income the property generates is factored in with income produced by neighboring properties to derive the current value.
The Bottom Line
Examining the data from all approaches, the appraiser is then ready to put down an estimated market value for the subject property. Note: While this amount is probably the most accurate indication of what a house is worth, it may not be the final sales price. 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 used 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 sell the property again. It all comes down to this, an appraiser from Collard Appraisal Group, Inc. will guarantee you get the most accurate property value, so you can make the most informed real estate decisions.