Breaking Down the AppraisalsAcquiring real estate is the most significant investment many people may ever consider. Whether it's where you raise your family, a second vacation home or an investment, purchasing real property is a detailed transaction that requires multiple people working in concert to make it all happen.
Practically all the participants are quite familiar. The real estate agent is the most known person in the transaction. Then, the mortgage company provides the financial capital needed to finance the exchange. The title company makes sure that all requirements of the sale are completed and that a clear title passes to the buyer from the seller.
So what party makes sure the property is consistent with the amount being paid? In comes the appraiser. We provide an unbiased estimate of what a buyer might expect to pay - or a seller receive - for a property, where both buyer and seller are informed parties. A professional California licensed appraiser from McDonough Appraisal Service will ensure you as an interested party are informed.
Inspecting the subject propertyOur first responsibility at McDonough Appraisal Service is to inspect the property to ascertain its true status. We must actually view aspects of the property, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really exist and are in the shape a typical person would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is correct and illustrating the layout of the property. Most importantly, we identify any obvious amenities - or defects - that would have an impact on the value of the property.
Following the inspection, an appraiser employs two or three approaches when determining the value of the property: paired sales analysis and, in the case of a rental property, an income approach.
Cost ApproachHere, the appraiser pulls information on local construction costs, labor rates and other factors to determine how much it would cost to construct a property similar to the one being appraised. This value commonly sets the upper limit on what a property would sell for. It's also the least used method.
Sales ComparisonAppraisers get to know the neighborhoods in which they work. We thoroughly understand the value of particular features to the homeowners of that area. Then, the appraiser looks up recent transactions in the vicinity and finds properties which are 'comparable' to the property in question. By assigning a dollar value to certain items such as fireplaces, room layout, appliance upgrades, extra bathrooms or bedrooms, or quality of construction, we adjust the comparable properties so that they more accurately portray the features of subject.
Valuation Using the Income ApproachIn the case of income producing properties - rental houses for example - we may use a third method of valuing real estate. In this situation, the amount of revenue the property generates is factored in with other rents in the area for comparable properties to give an indicator of the current value.
ReconciliationAnalyzing the data from all approaches, the appraiser is then ready to document an estimated market value for the property at hand. It is important to note that while this amount is probably the most reliable indication of what a property would sell for in an open market, it probably will not be the final sales price. It's not uncommon for prices to 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 employed as a guideline for lenders who don't want to loan a buyer more money than the property would likely sell for in an open marketplace. Here's what it all boils down to: An appraiser from McDonough Appraisal Service will guarantee you get the most fair and balanced property value, so you can make the most informed real estate decisions.