What Goes Into an Appraisal?
Getting a house can be the biggest transaction most of us could ever encounter. It doesn't matter if a main residence, a second vacation property or one of many rentals, purchasing real property is a detailed financial transaction that requires multiple people working in concert to see it through.
Most people are familiar with the parties taking part in the transaction. The real estate agent is the most familiar entity in the exchange. Then, the bank provides the financial capital needed to bankroll the transaction. And ensuring all requirements of the sale are completed and that a clear title transfers to the buyer from the seller is the title company.
So, what party makes sure the value of the property is consistent with the amount being paid? This is where the appraiser comes in. 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 licensed, certified, professional appraiser from McLaughlin Property Valuation Services will ensure, you as an interested party, are informed.
Inspecting the subject property
To determine an accurate status of the property, it's our duty to first complete a thorough inspection. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they indeed are there 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 accurate and conveying the layout of the property. Most importantly, the appraiser looks for any obvious amenities - or defects - that would have an impact on the value of the house.
Once the site has been inspected, we use 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, the appraiser pulls information on local building costs, labor rates and other factors to derive how much it would cost to build a property nearly identical to the one being appraised. This value usually sets the maximum on what a property would sell for. It's also the least used predictor of value.
Paired Sales Analysis
Appraisers can tell you a lot about the communities in which they appraise. They thoroughly understand the value of particular features to the homeowners of that area. Then, the appraiser researches recent transactions in close proximity to the subject 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, additional bathrooms or bedrooms, or quality of construction, we add or subtract from each comparable's sales price so that they more accurately portray the features of subject property.
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 McLaughlin Property Valuation Services, we are experts when it comes to knowing the worth of real estate features in Moreno Valley and Riverside County neighborhoods. This approach to value is commonly given the most weight when an appraisal is for a real estate sale.
Valuation Using the Income Approach
A third way of valuing real estate is sometimes employed when an area has a reasonable number of renter occupied properties. In this scenario, the amount of revenue the property yields is factored in with other rents in the area for comparable properties to determine the current value.
Putting It All Together
Combining information from all approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. The estimate of value on 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 is worth. Prices 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 recover in the event they had to put the property on the market again. At the end of the day, an appraiser from McLaughlin Property Valuation Services will guarantee you attain the most fair and balanced property value, so you can make wise real estate decisions.