What Is an Appraisal?
Their home's purchase is the largest financial decision most could ever make. It doesn't matter if a primary residence, a seasonal vacation home or one of many rentals, the purchase of real property is an involved transaction that requires multiple parties to see it through.
You're probably familiar with the parties having a role in the transaction. The most familiar entity in the transaction is the real estate agent. Next, the bank provides the money necessary to finance the transaction. And ensuring all aspects of the transaction are completed and that the title is clear to pass from the seller to the purchaser is the title company.
So, who's responsible for making sure the property 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 parcel of real estate, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from JMS Appraisal will ensure, you as an interested party, are informed.
Appraisals begin with the home inspection
To ascertain an accurate status of the property, it's our responsibility to first complete a thorough inspection. We must actually view aspects of the property, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed are present and are in the shape a reasonable person would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is proper and illustrating the layout of the property. Most importantly, the appraiser identifies any obvious amenities - or defects - that would affect the value of the property.
After the inspection, an appraiser uses two or three approaches to determining the value of the 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, labor rates and other elements to figure out 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.
Paired Sales Analysis
Appraisers get to know the subdivisions in which they appraise. They thoroughly understand the value of particular features to the people of that area. Then, the appraiser looks up recent sales in close proximity to the subject and finds properties which are 'comparable' to the subject 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 portray the features of subject.
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 JMS Appraisal, we are experts when it comes to knowing the value of real estate features in Aliso Viejo and Orange County neighborhoods. The sales comparison approach to value is most often awarded the most consideration when an appraisal is for a home sale.
Valuation Using the Income Approach
A third way of valuing real estate is sometimes applied when a neighborhood has a measurable number of renter occupied properties. In this case, the amount of revenue the real estate yields is factored in with income produced by similar properties to derive the current value.
Arriving at a Value Conclusion
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 at the bottom of the appraisal report is not always what's being paid for the property even though it is likely the best indication of a property's valueThere are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust an offer or listing price up or down. 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. It all comes down to this, an appraiser from JMS Appraisal will help you attain the most accurate property value, so you can make the most informed real estate decisions.