What Is an Appraisal?
Their home's purchase can be the most significant investment most may ever make. It doesn't matter if a main residence, an additional vacation home or one of many rentals, the purchase of real property is a complex financial transaction that requires multiple parties to pull it all off.
Most people are familiar with the parties having a role in the transaction. The most known entity in the exchange is the real estate agent. Then, the mortgage company provides the financial capital required to finance the transaction. And ensuring all areas of the transaction are completed and that the title is clear to transfer from the seller to the buyer is the title company.
So, who's responsible for making sure the value of the property is in line with the amount being paid? In comes the appraiser. We provide an unbiased opinion of what a buyer might expect to pay — or a seller receive — for a property, 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.
The inspection is where an appraisal starts
Our first duty at JMS Appraisal is to inspect the property to ascertain its true status. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they indeed are present and are in the shape a reasonable person would expect them to be. To make sure the stated square footage has not been misrepresented and document the layout of the property, the inspection often entails creating a sketch of the floorplan. Most importantly, we identify any obvious features - or defects - that would have an impact on the value of the property.
Once the site has been inspected, an appraiser uses two or three approaches to determining the value of the property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.
This is where we use information on local construction costs, labor rates and other elements to derive how much it would cost to replace the property being appraised. This value often sets the maximum on what a property would sell for. The cost approach is also the least used method.
Analyzing Comparable Sales
Appraisers are intimately familiar with the subdivisions in which they work. They innately understand the value of certain features to the residents of that area. Then, the appraiser researches recent sales in the area and finds properties which are 'comparable' to the real estate at hand. 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 adjust the comparable properties so that they more accurately portray the features of subject.
In the end, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At JMS Appraisal, we are experts when it comes to knowing the worth of particular items in Aliso Viejo and Orange County neighborhoods. The sales comparison approach to value is most often given the most importance when an appraisal is for a real estate sale.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - the appraiser may use an additional way of valuing a house. In this scenario, the amount of revenue the property yields is taken into consideration along with income produced by nearby properties to determine the current value.
Arriving at a Value Conclusion
Analyzing the data from all applicable approaches, the appraiser is then ready to put down an estimated market value for the property in question. 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 valueIt'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'. Regardless, the appraised value is often used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. Here's what it all boils down to, an appraiser from JMS Appraisal will guarantee you get the most fair and balanced property value, so you can make the most informed real estate decisions.