Real Estate Appraisals: A Primer
Their home's purchase can be the biggest financial decision many people might ever consider. Whether it's a main residence, an additional vacation home or one of many rentals, purchasing real property is a complex financial transaction that requires multiple people working in concert to see it through.
You're probably familiar with the parties taking part in the transaction. The most familiar entity in the transaction is the real estate agent. Then, the mortgage company provides the financial capital necessary to finance the transaction. The title company sees to it that all aspects of the sale are completed and that a clear title passes from the seller to the purchaser.
So, who makes sure the value of the property is in line with the purchase price? In comes the appraiser. We provide an unbiased opinion of what a buyer could expect to pay — or a seller receive — for a property, 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.
Inspecting the subject property
To ascertain the true status of the property, it's our duty to first complete a thorough inspection. We must actually see aspects of the property, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed are there and are in the condition a reasonable buyer would expect them to be. To ensure the stated square footage is accurate and convey the layout of the property, the inspection often requires creating a sketch of the floorplan. Most importantly, we look for any obvious features - or defects - that would have an impact on the value of the house.
Back at the office, we use two or three approaches to determining the value of real property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.
This is where we gather information on local building costs, the cost of labor and other elements to determine how much it would cost to replace the property 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 are intimately familiar with the neighborhoods in which they work. They innately understand the value of particular features to the residents of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the property being appraised. By assigning a dollar value to certain items such as fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, we adjust the comparable properties so that they more accurately match 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. At Fariss Appraisal Services, we are an authority in knowing the worth of real estate features in Bakersfield and Kern County neighborhoods. This approach to value is typically awarded the most consideration when an appraisal is for a home purchase.
Valuation Using the Income Approach
A third way of valuing approach to value is sometimes used when a neighborhood has a measurable number of rental properties. In this situation, the amount of revenue the real estate generates is taken into consideration along with income produced by comparable properties to give an indicator of the current value.
Arriving at a Value Conclusion
Combining information from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the property in question. Note: While the appraised value is probably the strongest indication of what a house is worth, it probably will not be the final sales price. Depending on the individual 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 the event they had to put the property on the market again. Here's what it all boils down to, an appraiser from Fariss Appraisal Services will guarantee you discover the most accurate property value, so you can make wise real estate decisions.