What Goes Into an Appraisal?
Buying a house can be the most serious transaction most people may ever encounter. Whether it's where you raise your family, an additional vacation property or an investment, the purchase of real property is a detailed financial transaction that requires multiple parties to make it all happen.
You're likely to be familiar with the parties having a role in the transaction. The most recognizable entity in the transaction is the real estate agent. Then, the bank provides the financial capital required to bankroll the transaction. And the title company sees to it that all details of the transaction are completed and that a clear title passes to the buyer from the seller.
So, who's responsible for making sure the value of the property is consistent with the amount being paid? 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 Diamondback Appraisal & Consulting, Inc. will ensure, you as an interested party, are informed.
Appraisals begin with the property inspection
Our first duty at Diamondback Appraisal & Consulting, Inc. is to inspect the property to determine its true status. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly are present and are in the condition a typical buyer would expect them to be. To make sure the stated size of the property is accurate and document the layout of the property, the inspection often entails creating a sketch of the floorplan. Most importantly, we identify any obvious features - or defects - that would affect the value of the house.
Following the inspection, an appraiser uses two or three approaches to determining the value of real property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.
This is where we analyze information on local construction costs, labor rates and other elements to ascertain how much it would cost to construct a property nearly identical to the one being appraised. This estimate often sets the maximum on what a property would sell for. It's also the least used method.
Analyzing Comparable Sales
Appraisers are intimately familiar with the neighborhoods in which they appraise. They thoroughly understand the value of certain features to the residents of that area. Then, the appraiser researches recent sales in the area and finds properties which are 'comparable' to the home being appraised. Using knowledge of the value of certain items such as upgraded appliances, extra bathrooms, additional living area, quality of construction, lot size, we adjust the comparable properties so that they more accurately match 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. At Diamondback Appraisal & Consulting, Inc., we are experts when it comes to knowing the worth of real estate features in Mesa and Maricopa County neighborhoods. This approach to value is typically given the most weight when an appraisal is for a home exchange.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - the appraiser may use an additional method of valuing a property. In this scenario, the amount of income the property produces is taken into consideration along with income produced by nearby properties to give an indicator of the current value.
Combining information from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. Note: While the appraised value is probably the most accurate indication of what a property is worth, it probably will not be the price at which the property closes. There are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust the final price up or down. But 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. The bottom line is, an appraiser from Diamondback Appraisal & Consulting, Inc. will guarantee you discover the most fair and balanced property value, so you can make wise real estate decisions.