Understanding the Appraisal Process
Acquiring a house can be the most serious investment most people might ever make. Whether it's a primary residence, a seasonal vacation home or an investment, the purchase of real property is a detailed financial transaction that requires multiple people working in concert to make it all happen.
Practically all the parties involved are quite familiar. The real estate agent is the most known face in the transaction. Next, the lender provides the financial capital necessary to finance the exchange. And ensuring all details of the exchange are completed and that a clear title passes to the buyer from the seller is the title company.
So, what party is responsible for making sure the value of the real estate is in line with the purchase price? This is where you meet 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 licensed, certified, professional appraiser from Fariss Appraisal Services will ensure, you as an interested party, are informed.
The inspection is where an appraisal begins
Our first task at Fariss Appraisal Services 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 condition a reasonable person would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is correct and illustrating the layout of the property. Most importantly, we identify any obvious amenities - or defects - that would affect the value of the house.
Once the site has been inspected, we use 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.
Here, the appraiser analyzes information on local building costs, the cost of labor and other elements to derive how much it would cost to construct a property comparable 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.
Analyzing Comparable Sales
Appraisers are intimately familiar with the communities in which they work. They thoroughly understand the value of particular features to the homeowners 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. By assigning a dollar value to certain items such as upgraded appliances, extra bathrooms, additional living area, quality of construction, lot size, we adjust the comparable properties so that they are more accurately in line with 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. When it comes to valuing features of homes in Bakersfield and Kern, Fariss Appraisal Services can't be beat. The sales comparison approach to value is most often given the most importance when an appraisal is for a home sale.
Valuation Using the Income Approach
A third way of valuing real estate is sometimes applied when an area has a reasonable number of rental properties. In this scenario, the amount of income the property produces is factored in with other rents in the area for comparable properties to give an indicator of the current value.
Putting It All Together
Combining information from all applicable approaches, the appraiser is then ready to put down an estimated market value for the property at hand. Note: While this amount is probably the strongest indication of what a house is worth, it may not be the price at which the property closes. There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust the final price up or down. But the appraised value is typically 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 sell the property again. At the end of the day, an appraiser from Fariss Appraisal Services will guarantee you get the most accurate property value, so you can make wise real estate decisions.