Making Sense of the Appraisal Process
Their home's purchase can be the most significant transaction most people may ever make. Whether it's a primary residence, an additional vacation property or one of many rentals, the purchase of real property is an involved financial transaction that requires multiple people working in concert to see it through.
Most people are familiar with the parties taking part in the transaction. The real estate agent is the most familiar face in the transaction. Then, the bank provides the financial capital necessary to fund the exchange. And ensuring all requirements of the exchange are completed and that the title is clear to pass from the seller to the purchaser is the title company.
So, what party is responsible for making sure the value of the real estate is consistent with the purchase price? In comes 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 Fariss Appraisal Services will ensure, you as an interested party, are informed.
Appraisals begin with the home inspection
Our first responsibility at Fariss Appraisal Services is to inspect the property to determine its true status. We must actually see features, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they truly are there and are in the condition a typical person would expect them to be. To ensure the stated square footage has not been misrepresented and illustrate the layout of the property, the inspection often includes creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious features - or defects - that would have an impact on the value of the property.
Back at the office, an appraiser uses 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.
This is where we gather information on local building costs, the cost of labor and other factors to determine how much it would cost to replace the property being appraised. This figure usually sets the maximum on what a property would sell for. It's also the least used predictor of value.
Paired Sales Analysis
Appraisers can tell you a lot about the neighborhoods in which they appraise. They thoroughly understand the value of certain features to the residents 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 at hand. By assigning a dollar value to certain items such as upgraded appliances, additional 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.
Once all necessary adjustments have been made, 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 knowing the true value of features of homes in Bakersfield and Kern, Fariss Appraisal Services is second to none. The sales comparison approach to value is typically given the most weight when an appraisal is for a home sale.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - the appraiser may use an additional approach to value. In this scenario, the amount of income the real estate yields is taken into consideration along with other rents in the area for comparable properties to determine the current value.
Coming Up With The Final Value
Analyzing the data from all approaches, the appraiser is then ready to put down an estimated market value for the property at hand. It is important to note that while the appraised value is probably the most reliable indication of what a property is worth, it may not be the final sales price. Prices can always 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 Fariss Appraisal Services will help you get the most fair and balanced property value, so you can make the most informed real estate decisions.