Real Property Appraisals: A Primer
Purchasing a home can be the most significant investment many might ever encounter. It doesn't matter if where you raise your family, a seasonal vacation home or one of many rentals, purchasing real property is a complex transaction that requires multiple people working in concert to pull it all off.
Most of the participants are quite familiar. The most known person in the exchange is the real estate agent. Then, the bank provides the money needed to bankroll the transaction. And ensuring all requirements of the exchange are completed and that the title is clear to pass to the buyer from the seller is the title company.
So, what party makes sure the property is worth the purchase price? This is where you meet the appraiser. We provide an unbiased estimate of what a buyer could 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 Central Arizona Appraisers will ensure, you as an interested party, are informed.
Inspecting the subject property
To determine an accurate status of the property, it's our responsibility to first perform a thorough inspection. We must physically view features, such as the number of bedrooms and bathrooms, the location, amenities, 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 describe the layout of the property, the inspection often requires creating a sketch of the floorplan. Most importantly, the appraiser looks for any obvious features - or defects - that would affect the value of the house.
Next, after the inspection, we use two or three approaches to determining the value of the property: paired sales analysis and, in the case of a rental property, an income approach.
Here, the appraiser analyzes information on local building costs, the cost of labor and other elements to derive how much it would cost to build a property comparable to the one being appraised. This value often sets the maximum on what a property would sell for. It's also the least used predictor of value.
Appraisers can tell you a lot about the subdivisions in which they appraise. They innately understand the value of certain features to the residents of that area. Then, the appraiser looks up recent transactions in the vicinity and finds properties which are 'comparable' to the home in question. Using knowledge of the value of 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 portray the features of subject property.
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. When it comes to valuing features of homes in Phoenix and Monterey, Central Arizona Appraisers is second to none. The sales comparison approach to value is typically awarded the most weight when an appraisal is for a home purchase.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - the appraiser may use a third method of valuing a house. In this case, the amount of income the real estate generates is taken into consideration along with income produced by nearby properties to determine the current value.
The Bottom Line
Analyzing the data from all approaches, the appraiser is then ready to document an estimated market value for the property at hand. The estimate of value on the appraisal report is not necessarily the final sales price even though it is likely the best indication of a property's valueDepending on the specific 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 often employed as a guideline for lenders who don't want to loan a buyer more money than they could recover in case they had to put the property on the market again. It all comes down to this, an appraiser from Central Arizona Appraisers will help you discover the most fair and balanced property value, so you can make profitable real estate decisions.