A Description of the Appraisal Process
Purchasing a house is the largest transaction most will ever encounter. Whether it's a main residence, a second vacation property or an investment, the purchase of real property is an involved financial transaction that requires multiple people working in concert to make it all happen.
You're likely to be familiar with the parties having a role in the transaction. The most familiar person in the exchange is the real estate agent. Next, the bank provides the financial capital necessary to finance the exchange. The title company ensures that all areas of the exchange are completed and that the title is clear to pass to the buyer from the seller.
So, what party makes sure the real estate is worth the purchase price? In comes the appraiser. We provide an unbiased opinion 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 MacBride Appraisal will ensure, you as an interested party, are informed.
The inspection is where an appraisal begins
To determine the true status of the property, it's our duty to first perform a thorough inspection. We must physically see aspects of the property, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really are there and are in the shape a reasonable person would expect them to be. To make sure the stated square footage has not been misrepresented and document the layout of the property, the inspection often entails creating a sketch of the floorplan. Most importantly, we identify any obvious features - or defects - that would affect the value of the property.
Following the inspection, we use two or three approaches to determining the value of real property: paired sales analysis and, in the case of a rental property, an income approach.
This is where the appraiser pulls information on local construction costs, the cost of labor and other factors to derive how much it would cost to construct a property similar to the one being appraised. This estimate commonly sets the upper limit on what a property would sell for. The cost approach is also the least used method.
Analyzing Comparable Sales
Appraisers become very familiar with the subdivisions in which they appraise. They innately understand the value of certain features to the homeowners of that area. Then, the appraiser looks up recent sales in the neighborhood and finds properties which are 'comparable' to the real estate in question. Using knowledge of the value of certain items such as upgraded appliances, additional 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 property.
After all differences have been accounted for, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At MacBride Appraisal, we are an authority in knowing the worth of real estate features in Carlsbad and San Diego County neighborhoods. The sales comparison approach to value is commonly given the most consideration when an appraisal is for a real estate exchange.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - we may use an additional approach to value. In this case, the amount of income the real estate produces is taken into consideration along with income produced by comparable properties to give an indicator of the current value.
Arriving at a Value Conclusion
Examining the data from all approaches, the appraiser is then ready to document an estimated market value for the property at hand. The estimate of value at the bottom of the appraisal report is not necessarily 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 the property is actually worth. Here's what it all boils down to, an appraiser from MacBride Appraisal will guarantee you get the most fair and balanced property value, so you can make profitable real estate decisions.