Real Property Appraisals: A Primer
Their home's purchase can be the biggest financial decision many people could ever consider. It doesn't matter if where you raise your family, a seasonal vacation home or a rental fixer upper, the purchase of real property is an involved transaction that requires multiple parties to make it all happen.
Most of the parties participating are very familiar. The most known face in the transaction is the real estate agent. Then, the mortgage company provides the financial capital required to finance the exchange. And the title company ensures that all requirements of the exchange are completed and that the title is clear to transfer from the seller to the buyer.
So, who's responsible for making sure the value of the property is consistent with the purchase price? This is where the appraiser comes in. 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 Diamondback Appraisal & Consulting, Inc. will ensure, you as an interested party, are informed.
Appraisals start with the home inspection
To ascertain an accurate status of the property, it's our responsibility to first perform a thorough inspection. We must actually view aspects of the property, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they indeed exist and are in the shape a typical person would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is proper and illustrating the layout of the property. Most importantly, we look for any obvious features - or defects - that would affect the value of the property.
Following the inspection, we use two or three approaches to determining the value of real property: paired sales analysis and, in the case of a rental property, an income approach.
Here, the appraiser gathers 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 upper limit on what a property would sell for. The cost approach is also the least used predictor of value.
Paired Sales Analysis
Appraisers become very familiar with the subdivisions in which they appraise. They thoroughly understand the value of particular features to the people of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the subject in question. 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 more accurately portray the features of subject property.
An opinion of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. At Diamondback Appraisal & Consulting, Inc., we are experts in knowing the worth of particular items in Mesa and Maricopa County neighborhoods. This approach to value is usually given the most consideration when an appraisal is for a home exchange.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - we may use an additional way of valuing real estate. In this situation, the amount of revenue the property produces is taken into consideration along with income produced by comparable properties to determine the current value.
Coming Up With The Final Value
Examining the data from all applicable approaches, the appraiser is then ready to put down an estimated market value for the property in question. It is important to note that while this amount is probably the strongest indication of what a property is worth, it probably will not be the price at which the property closes. Depending on the individual circumstances 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 typically 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 Diamondback Appraisal & Consulting, Inc. will guarantee you discover the most accurate property value, so you can make profitable real estate decisions.