What Goes Into an Appraisal?
A home purchase is the most important investment some of us could ever make. It doesn't matter if a primary residence, an additional vacation home or a rental fixer upper, purchasing real property is a detailed transaction that requires multiple parties to see it through.
You're probably familiar with the parties taking part in the transaction. The real estate agent is the most known entity in the exchange. Next, the bank provides the financial capital needed to bankroll the deal. And ensuring all details of the sale are completed and that a clear title transfers from the seller to the buyer is the title company.
So, who makes 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 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 Maxwell Appraisal Services will ensure, you as an interested party, are informed.
Appraisals start with the property inspection
To determine the true status of the property, it's our duty to first conduct a thorough inspection. We must physically view features, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they really are there and are in the shape a reasonable person would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is accurate and illustrating the layout of the property. Most importantly, the appraiser looks for any obvious features - or defects - that would affect the value of the property.
Back at the office, an appraiser uses 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 we gather information on local building costs, labor rates and other factors to figure out how much it would cost to replace the property being appraised. This value usually 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 neighborhoods in which they work. They innately understand the value of particular features to the residents of that area. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are 'comparable' to the real estate at hand. 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 adjust the comparable properties so that they are more accurately in line with the features of subject.
An opinion of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. At Maxwell Appraisal Services, we are an authority when it comes to knowing the value of particular items in Poway and San Diego County neighborhoods. The sales comparison approach to value is usually awarded the most weight when an appraisal is for a real estate sale.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - the appraiser may use a third method of valuing a house. In this scenario, the amount of income the real estate produces is taken into consideration along with income produced by nearby properties to give an indicator of the current value.
Putting It All Together
Examining the data from all approaches, the appraiser is then ready to put down an estimated market value for the subject property. Note: While this amount 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. But the appraised value is often employed as a guideline for lenders who don't want to loan a buyer more money than they could get back in case they had to sell the property again. It all comes down to this, an appraiser from Maxwell Appraisal Services will guarantee you get the most fair and balanced property value, so you can make wise real estate decisions.