An Overview of the Appraisal Process
Getting a house can be the most important investment some of us might ever consider. Whether it's where you raise your family, a seasonal vacation property or a rental fixer upper, the purchase of real property is a detailed financial transaction that requires multiple people working in concert to pull it all off.
Most of the parties involved are quite familiar. The most familiar person in the transaction is the real estate agent. Then, the lender provides the financial capital necessary to bankroll the transaction. And ensuring all requirements of the transaction are completed and that a clear title transfers to the buyer from the seller is the title company.
So, who's responsible for making sure the value of the real estate is in line with 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 parcel of real estate, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from 1 Hour Appraisal will ensure, you as an interested party, are informed.
The inspection is where an appraisal begins
Our first responsibility at 1 Hour Appraisal is to inspect the property to ascertain its true status. We must see features first hand, 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. The inspection often includes a sketch of the floorplan, ensuring the square footage is proper and illustrating the layout of the property. Most importantly, we identify any obvious amenities - or defects - that would have an impact on the value of the property.
Back at the office, we use two or three approaches to determining the value of real property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.
Here, we gather information on local construction costs, labor rates and other elements to determine how much it would cost to replace the property being appraised. This figure commonly sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.
Analyzing Comparable Sales
Appraisers become very familiar with the subdivisions in which they work. They thoroughly understand the value of particular features to the residents of that area. Then, the appraiser researches recent transactions in close proximity to the subject and finds properties which are 'comparable' to the real estate being appraised. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, we adjust the comparable properties so that they more accurately match the features of subject.
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. When it comes to putting a value on features of homes in Fresno and Fresno, 1 Hour Appraisal is second to none. This approach to value is most often given the most consideration when an appraisal is for a real estate sale.
Valuation Using the Income Approach
A third way of valuing a house is sometimes applied when an area has a measurable number of renter occupied properties. In this case, the amount of income the property yields is factored in with income produced by nearby properties to determine the current value.
The Bottom Line
Combining information from all applicable approaches, the appraiser is then ready to document an estimated market value for the property at hand. Note: While this amount is probably the best indication of what a property is worth, it probably will not be the final sales price. Prices can always be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. But 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 1 Hour Appraisal will help you discover the most fair and balanced property value, so you can make profitable real estate decisions.