What Goes Into an Appraisal?
Acquiring real estate can be the most significant investment some will ever consider. It doesn't matter if a primary residence, a seasonal vacation home or a rental fixer upper, purchasing real property is an involved transaction that requires multiple people working in concert to make it all happen.
The majority of the participants are very familiar. The real estate agent is the most known face in the exchange. Then, the lender provides the money required to finance the exchange. And the title company sees to it that all details of the exchange are completed and that the title is clear to pass to the buyer from the seller.
So, what party is responsible for making sure the real estate is worth the purchase price? 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 All City Appraisal will ensure, you as an interested party, are informed.
Inspecting the subject property
Our first duty at All City Appraisal is to inspect the property to determine its true status. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they indeed exist and are in the shape a reasonable person would expect them to be. To ensure the stated square footage has not been misrepresented and describe the layout of the house, the inspection often requires creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious amenities - or defects - that would have an impact on the value of the property.
Once the site has been inspected, we use two or three approaches to determining the value of real property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.
This is where we gather information on local construction costs, labor rates and other factors to determine how much it would cost to build a property similar to the one being appraised. This estimate commonly sets the maximum on what a property would sell for. It's also the least used predictor of value.
Appraisers become very familiar with the communities in which they appraise. They innately understand the value of particular features to the people of that area. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are 'comparable' to the subject in question. By assigning a dollar value to 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 are more accurately in line with 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 All City Appraisal, we are an authority when it comes to knowing the worth of particular items in Woodland Hills and Los Angeles County neighborhoods. This approach to value is usually awarded the most weight when an appraisal is for a real estate purchase.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - we may use a third way of valuing a property. In this case, the amount of income the real estate yields is factored in with income produced by similar properties to derive the current value.
Arriving at a Value Conclusion
Examining the data from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the property at hand. 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. Depending on the specific situations 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 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 All City Appraisal will help you get the most fair and balanced property value, so you can make the most informed real estate decisions.