What Goes Into an Appraisal?
A home purchase can be the biggest investment many of us may ever encounter. Whether it's a main residence, a seasonal vacation property or one of many rentals, the purchase of real property is an involved transaction that requires multiple parties to pull it all off.
Most people are familiar with the parties taking part in the transaction. The most known person in the exchange is the real estate agent. Then, the mortgage company provides the money needed to finance the deal. And ensuring all aspects of the sale are completed and that the title is clear to pass from the seller to the purchaser is the title company.
So, who's responsible for making sure the property is worth the amount being paid? This is where the appraiser comes in. We provide an unbiased opinion 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 MacBride Appraisal will ensure, you as an interested party, are informed.
The inspection is where an appraisal starts
To ascertain an accurate status of the property, it's our responsibility to first perform 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 truly are there and are in the condition a typical person would expect them to be. To make sure the stated square footage is accurate and describe the layout of the property, the inspection often entails creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious features - or defects - that would affect the value of the property.
Following the inspection, an appraiser uses two or three approaches to determining the value of real property: sales comparison and, in the case of a rental property, an income approach.
This is where we pull information on local building costs, the cost of labor and other elements to calculate how much it would cost to replace the property being appraised. This figure usually sets the maximum on what a property would sell for. It's also the least used method.
Analyzing Comparable Sales
Appraisers can tell you a lot about the communities in which they appraise. They thoroughly understand the value of specific features to the residents of that area. Then, the appraiser researches recent sales in the area and finds properties which are 'comparable' to the property in question. Using knowledge of the value of 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.
A true estimate of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. At MacBride Appraisal, we are an authority when it comes to knowing the value of real estate features in Carlsbad and San Diego County neighborhoods. This approach to value is most often given the most importance when an appraisal is for a home sale.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - the appraiser may use an additional method of valuing real estate. In this situation, the amount of revenue the property generates is factored in with income produced by comparable properties to give an indicator of the current value.
The Bottom Line
Combining information from all approaches, the appraiser is then ready to put down an estimated market value for the property at hand. 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 valueDepending on the individual 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 often employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. At the end of the day, an appraiser from MacBride Appraisal will help you discover the most fair and balanced property value, so you can make the most informed real estate decisions.