A home purchase is the most significant financial decision many of us might ever consider. Whether it's where you raise your family, a second vacation home or an investment, the purchase of real property is an involved transaction that requires multiple people working in concert to pull it all off.
Most of the participants are very familiar. The most familiar entity in the exchange is the real estate agent. Next, the mortgage company provides the financial capital required to fund the deal. And the title company ensures that all areas of the exchange are completed and that a clear title transfers to the buyer from the seller.
So, who's responsible for making sure the value of the real estate is in line with the purchase price? In comes the appraiser. We provide an unbiased opinion of what a buyer might 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 Phoenix Valuations, LLC will ensure, you as an interested party, are informed.
Appraisals begin with the inspection
Our first task at Phoenix Valuations, LLC is to inspect the property to ascertain its true status. We must actually see aspects of the property, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they indeed are present and are in the condition a reasonable person would expect them to be. To make sure the stated square footage has not been misrepresented and document the layout of the property, the inspection often includes creating a sketch of the floorplan. Most importantly, we look for any obvious features - or defects - that would affect the value of the property.
Back at the office, an appraiser uses 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, we use information on local building costs, labor rates and other elements to figure out how much it would cost to construct a property nearly identical to the one being appraised. This estimate usually sets the maximum on what a property would sell for. The cost approach is also the least used method.
Appraisers become very familiar with the neighborhoods in which they appraise. They innately understand the value of certain features to the people of that area. Then, the appraiser looks up recent transactions in the vicinity and finds properties which are 'comparable' to the property 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 add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject.
A valid estimate of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. At Phoenix Valuations, LLC, we are an authority in knowing the worth of real estate features in Scottsdale and Maricopa County neighborhoods. This approach to value is most often given the most consideration when an appraisal is for a home purchase.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - we may use a third method of valuing a house. In this situation, the amount of income the real estate generates is taken into consideration along with other rents in the area for comparable properties to derive the current value.
Coming Up With The Final Value
Analyzing the data from all approaches, the appraiser is then ready to document an estimated market value for the subject property. Note: While the appraised value is probably the most reliable indication of what a house is worth, it probably will 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. The bottom line is, an appraiser from Phoenix Valuations, LLC will guarantee you get the most fair and balanced property value, so you can make profitable real estate decisions.