Real Property Appraisals: A Primer
Their home's purchase can be the most significant investment many of us may ever make. It doesn't matter if a main residence, an additional vacation home or an investment, the purchase of real property is an involved transaction that requires multiple parties to make it all happen.
Most of the people participating are quite familiar. The most recognizable person in the transaction is the real estate agent. Then, the bank provides the financial capital required to bankroll the transaction. And ensuring all areas of the sale are completed and that the title is clear to pass to the buyer from the seller is the title company.
So, who makes 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 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 Susan Scotto Allison will ensure, you as an interested party, are informed.
Inspecting the subject property
To determine the true status of the property, it's our duty to first complete a thorough inspection. We must actually view features, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they indeed exist and are in the shape a reasonable buyer would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is accurate and conveying the layout of the property. Most importantly, we look for any obvious amenities - or defects - that would affect the value of the property.
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.
This is where the appraiser gathers information on local construction costs, the cost of labor and other factors to derive how much it would cost to construct a property similar to the one being appraised. This figure commonly sets the upper limit on what a property would sell for. It's also the least used method.
Appraisers get to know the communities 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 the neighborhood and finds properties which are 'comparable' to the subject being appraised. By assigning a dollar value to certain items such as fireplaces, room layout, appliance upgrades, extra bathrooms or bedrooms, or quality of construction, we add or subtract from each comparable's sales price so that they more accurately match the features of subject property.
Once all necessary adjustments have been made, 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 knowing the true worth of features of homes in Phoenix and Maricopa, Susan Scotto Allison is second to none. This approach to value is commonly given the most weight when an appraisal is for a home sale.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - we may use a third approach to value. In this situation, the amount of income the property yields is taken into consideration along with income produced by neighboring properties to derive the current value.
Putting It All Together
Examining the data from all applicable approaches, the appraiser is then ready to document an estimated market value for the property in question. The estimate of value at the bottom of the appraisal report is not necessarily the final sales price 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.Regardless, 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. Here's what it all boils down to, an appraiser from Susan Scotto Allison will guarantee you discover the most accurate property value, so you can make wise real estate decisions.