What are the parts of an appraisal?A home purchase can be the largest transaction many people may ever make. Whether it's where you raise your family, a second vacation home or a rental fixer upper, purchasing real property is a complex transaction that requires multiple parties to see it through.
Most people are familiar with the parties having a role in the transaction. The most familiar person in the exchange is the real estate agent. Next, the bank provides the financial capital needed to fund the transaction. The title company ensures that all details of the transaction are completed and that the title is clear to pass from the seller to the buyer.
So who makes sure the value of the real estate is in line with the amount being paid? This is where you meet the appraiser. We provide an unbiased estimate of what a buyer might expect to pay - or a seller receive - for a parcel of real estate, where both buyer and seller are informed parties. A professional Arizona licensed appraiser from Central Arizona Real Estate Appraisers will ensure you as an interested party are informed.
Inspecting the subject propertyTo ascertain an accurate status of the property, it's our responsibility to first conduct a thorough inspection. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, living areas, etc., to ensure they indeed exist and are in the condition a typical 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 amenities - or defects - that would affect the value of the house.
Back at the office, an appraiser employs two or three approaches when determining the value of the property: paired sales analysis and, in the case of a rental property, an income approach.
Replacement CostHere, the appraiser analyzes information on local construction costs, the cost of labor and other elements to derive 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 method.
Analyzing Comparable SalesAppraisers get to know the communities in which they work. We thoroughly understand the value of particular 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 real estate being appraised. By assigning a dollar value to certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or extra storage space, we adjust the comparable properties so that they are more accurately in line with the features of subject.
Valuation Using the Income ApproachIn the case of income producing properties - rental houses for example - the appraiser may use an additional approach to value. In this case, the amount of income the real estate yields is taken into consideration along with other rents in the area for comparable properties to derive the current value.
Putting It All TogetherExamining the data from all approaches, the appraiser is then ready to document an estimated market value for the property at hand. Note: While this amount is probably the strongest indication of what a property would sell for in an open market, it may not be the price at which the property closes. Depending on the individual 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 typically used as a guideline for lenders who don't want to loan a buyer more money than the property would likely sell for in an open marketplace. The bottom line is: An appraiser from Central Arizona Real Estate Appraisers will help you discover the most accurate property value, so you can make wise real estate decisions.