![]() Real Property Appraisals: A PrimerTheir home's purchase is the biggest financial decision many people may ever consider. It doesn't matter if where you raise your family, a seasonal vacation home or an investment, the purchase of real property is a complex financial transaction that requires multiple parties to see it through. The majority of the participants are quite familiar. The real estate agent is the most recognizable face in the transaction. Next, the bank provides the money necessary to bankroll the deal. And the title company makes sure that all areas of the transaction 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 value of the property is consistent with the purchase price? This is where you meet the appraiser. We provide an unbiased opinion of what a buyer could 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 Premier Appraisal of SoCal will ensure, you as an interested party, are informed. Appraisals start with the property inspectionTo ascertain the true status of the property, it's our responsibility to first perform a thorough inspection. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really exist and are in the shape a reasonable buyer would expect them to be. To make sure the stated size of the property is accurate and illustrate the layout of the home, the inspection often entails 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. Next, after the inspection, 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. ![]() Replacement CostThis is where we gather information on local building costs, the cost of labor and other factors to ascertain how much it would cost to construct a property similar to the one being appraised. This value often sets the upper limit on what a property would sell for. The cost approach is also the least used method. ![]() Sales ComparisonAppraisers are intimately 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 researches recent transactions in the vicinity and finds properties which are 'comparable' to the real estate being appraised. By assigning a dollar value to certain items such as upgraded appliances, additional bathrooms, additional living area, quality of construction, lot size, 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. When it comes to knowing the true value of features of homes in Mission Viejo and Orange, Premier Appraisal of SoCal is your local authority. The sales comparison approach to value is commonly awarded the most importance when an appraisal is for a home sale. Valuation Using the Income ApproachA third way of valuing real estate is sometimes employed when an area has a reasonable number of renter occupied properties. In this case, the amount of revenue the property produces is taken into consideration along with other rents in the area for comparable properties to give an indicator of the current value. Putting It All TogetherCombining information from all applicable approaches, the appraiser is then ready to put down an estimated market value for the subject property. The estimate of value at the bottom of 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. It's not uncommon for prices to be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. But the appraised value is often employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. At the end of the day, an appraiser from Premier Appraisal of SoCal will help you get the most accurate property value, so you can make the most informed real estate decisions. |