A Description of the Appraisal ProcessA home purchase can be the most significant financial decision many people could ever consider. Whether it's where you raise your family, an additional vacation property or one of many rentals, the purchase of real property is a detailed financial transaction that requires multiple people working in concert to pull it all off.
You're probably familiar with the parties taking part in the transaction. The real estate agent is the most known person in the transaction. Then, the lender provides the financial capital required to bankroll the transaction. Ensuring all areas of the exchange are completed and that a clear title passes from the seller to the buyer is the title company.
So what party makes sure the property is consistent with the purchase price? In comes the appraiser. We provide an unbiased opinion 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 California licensed appraiser from Desert Cities Appraisal Service will ensure you as an interested party are informed.
Inspecting the subject propertyOur first responsibility at Desert Cities Appraisal Service is to inspect the property to determine its true status. We must see features hands on, such as the number of bedrooms and bathrooms, the location, living areas, etc., to ensure they really are there and are in the condition a reasonable buyer would expect them to be. To ensure the stated square footage is accurate and illustrate the layout of the home, the inspection often includes creating a sketch of the floor plan. Most importantly, we look for any obvious amenities - or defects - that would affect the value of the house.
After the inspection, we use two or three approaches when determining the value of the property: sales comparison and, in the case of a rental property, an income approach.
Cost ApproachThis is where we pull information on local construction costs, labor rates and other elements to ascertain how much it would cost to construct a property similar to the one being appraised. This estimate often sets the upper limit on what a property would sell for. It's also the least used method.
Sales ComparisonAppraisers get to know the subdivisions in which they appraise. We innately understand the value of specific features to the residents of that area. Then, the appraiser looks up recent transactions in the area and finds properties which are 'comparable' to the property being appraised. Using knowledge of the value of certain items such as square footage, additional bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we add or subtract from each comparable's sales price so that they more accurately match the features of subject.
Valuation Using the Income ApproachA third way of valuing real estate is sometimes used when an area has a reasonable number of renter occupied properties. In this case, the amount of revenue the property generates is taken into consideration along with income produced by neighboring properties to derive the current value.
ReconciliationAnalyzing the data from all approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. 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 a property's market value There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust the final price 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 they could get back in case they had to sell the property again. At the end of the day: An appraiser from Desert Cities Appraisal Service will guarantee you attain the most accurate property value, so you can make the most informed real estate decisions.