Understanding the Appraisal Process
Getting real estate can be the most important transaction most of us could ever make. It doesn't matter if where you raise your family, an additional vacation property or one of many rentals, the purchase of real property is a detailed transaction that requires multiple people working in concert to pull it all off.
Most of the participants are quite familiar. The most familiar entity in the transaction is the real estate agent. Next, the mortgage company provides the money necessary to finance the exchange. And ensuring all areas of the transaction are completed and that a clear title transfers from the seller to the buyer is the title company.
So, what party is responsible for making sure the value of the property is consistent with the purchase price? In comes the appraiser. We provide an unbiased estimate 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 ASAP Appraisal Services, Inc. will ensure, you as an interested party, are informed.
Appraisals start with the home inspection
Our first responsibility at ASAP Appraisal Services, Inc. is to inspect the property to ascertain its true status. We must see features hands on, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly exist and are in the condition a reasonable buyer would expect them to be. To make sure the stated square footage is accurate and document the layout of the home, the inspection often requires creating a sketch of the floorplan. Most importantly, we identify any obvious amenities - or defects - that would affect the value of the house.
Next, after the inspection, an appraiser uses two or three approaches to determining the value of the property: sales comparison and, in the case of a rental property, an income approach.
Here, the appraiser uses information on local construction costs, the cost of labor and other factors to determine how much it would cost to build a property similar to the one being appraised. This value usually sets the maximum on what a property would sell for. The cost approach is also the least used method.
Paired Sales Analysis
Appraisers can tell you a lot about the neighborhoods in which they appraise. They innately understand the value of particular features to the homeowners of that area. Then, the appraiser looks up recent sales in the vicinity and finds properties which are 'comparable' to the property at hand. By assigning a dollar value to 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 are more accurately in line with the features of subject property.
In the end, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At ASAP Appraisal Services, Inc., we are experts when it comes to knowing the worth of particular items in Mesa and Maricopa County neighborhoods. This approach to value is typically given the most consideration when an appraisal is for a real estate sale.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - we may use an additional way of valuing a house. In this scenario, the amount of income the property yields is taken into consideration along with income produced by similar properties to give an indicator of the current value.
Putting It All Together
Combining information from all approaches, the appraiser is then ready to put down an estimated market value for the property in question. It is important to note that while the appraised value is probably the best indication of what a property is worth, it probably will not be the price at which the property closes. There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust an offer or listing price up or down. Regardless, the appraised value is often employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. The bottom line is, an appraiser from ASAP Appraisal Services, Inc. will help you discover the most fair and balanced property value, so you can make the most informed real estate decisions.