Home Appraisals: A Primer
Getting real estate can be the most serious investment some of us will ever consider. Whether it's a primary residence, a second vacation property or one of many rentals, purchasing real property is an involved transaction that requires multiple people working in concert to pull it all off.
Practically all the participants are very familiar. The real estate agent is the most familiar person in the exchange. Then, the lender provides the money necessary to fund the exchange. And the title company makes sure that all aspects of the exchange are completed and that the title is clear to pass from the seller to the buyer.
So, who's responsible for making sure the real estate is worth the amount being paid? This is where the appraiser comes in. We provide an unbiased estimate 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 Casa Grande Appraisal Service will ensure, you as an interested party, are informed.
Appraisals begin with the home inspection
To determine an accurate status of the property, it's our responsibility to first complete a thorough inspection. We must see features first hand, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they truly exist and are in the shape a typical buyer would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is proper and illustrating the layout of the property. Most importantly, the appraiser looks for any obvious features - or defects - that would have an impact on the value of the house.
Next, after the inspection, we use two or three approaches to determining the value of the property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.
This is where the appraiser analyzes information on local building costs, labor rates and other elements to figure out how much it would cost to build a property similar to the one being appraised. This value commonly sets the maximum on what a property would sell for. It's also the least used method.
Paired Sales Analysis
Appraisers become very familiar with the communities in which they work. They innately understand the value of specific features to the residents of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the subject at hand. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, extra 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 Casa Grande Appraisal Service, we are an authority in knowing the worth of real estate features in Casa Grande and Maricopa County neighborhoods. This approach to value is commonly awarded the most weight when an appraisal is for a home purchase.
Valuation Using the Income Approach
A third method of valuing approach to value is sometimes used when an area has a measurable number of rental properties. In this situation, the amount of income the property produces is taken into consideration along with other rents in the area for comparable properties to derive the current value.
Putting It All Together
Combining information from all applicable 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 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 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.But 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. The bottom line is, an appraiser from Casa Grande Appraisal Service will guarantee you get the most fair and balanced property value, so you can make profitable real estate decisions.