Decoding the Appraisal Process
Their home's purchase is the biggest financial decision most people might ever make. It doesn't matter if where you raise your family, a seasonal vacation property or a rental fixer upper, the purchase of real property is an involved transaction that requires multiple people working in concert to see it through.
The majority of the participants are very familiar. The real estate agent is the most known person in the transaction. Then, the lender provides the financial capital needed to finance the transaction. The title company ensures that all aspects of the exchange are completed and that a clear title transfers to the buyer from the seller.
So, who's responsible for making sure the property is worth the amount being paid? In comes the appraiser. We provide an unbiased opinion of what a buyer might expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Summit Appraisal, Inc. will ensure, you as an interested party, are informed.
The inspection is where an appraisal begins
Our first task at Summit Appraisal, Inc. is to inspect the property to ascertain its true status. We must physically see aspects of the property, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they really are present and are in the shape a reasonable buyer would expect them to be. To ensure the stated size of the property is accurate and illustrate the layout of the property, the inspection often includes creating a sketch of the floorplan. Most importantly, the appraiser looks for any obvious features - or defects - that would affect the value of the house.
Back at the office, we use two or three approaches to determining the value of real property: sales comparison and, in the case of a rental property, an income approach.
Here, we analyze information on local construction costs, the cost of labor and other factors to derive how much it would cost to build a property nearly identical to the one being appraised. This figure often 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 neighborhoods in which they work. They innately understand the value of certain features to the residents of that area. Then, the appraiser looks up recent sales in the vicinity and finds properties which are 'comparable' to the home in question. Using knowledge of the value of certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or additional storage space, 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. When it comes to putting a value on features of homes in Danville and Contra Costa, Summit Appraisal, Inc. is second to none. This approach to value is commonly given the most consideration 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 a neighborhood has a measurable number of renter occupied properties. In this situation, the amount of income the real estate produces is factored in with income produced by neighboring properties to give an indicator of the current value.
Coming Up With The Final Value
Analyzing the data from all applicable approaches, the appraiser is then ready to state an estimated market value for the property at hand. Note: While the appraised value is probably the most accurate indication of what a house is worth, it may not be the price at which the property closes. There are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust an offer or listing price up or down. Regardless, the appraised value is typically 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 Summit Appraisal, Inc. will guarantee you get the most fair and balanced property value, so you can make the most informed real estate decisions.