What Are the Components of an Appraisal?
Their home's purchase can be the most important investment most could ever consider. Whether it's where you raise your family, a second vacation home or one of many rentals, purchasing real property is an involved financial transaction that requires multiple parties to see it through.
It's likely you are familiar with the parties having a role in the transaction. The most recognizable face in the exchange is the real estate agent. Then, the bank provides the money necessary to fund the exchange. And the title company sees to it that all areas of the transaction are completed and that a clear title passes from the seller to the buyer.
So, what party is responsible for making sure the value of the property is consistent with the amount being paid? This is where the appraiser comes in. 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 licensed, certified, professional appraiser from Phoenix Valuations, LLC will ensure, you as an interested party, are informed.
The inspection is where an appraisal starts
Our first task at Phoenix Valuations, LLC 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, and so on, to ensure they truly exist 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 illustrate 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 have an impact on the value of the house.
Once the site has been inspected, we use two or three approaches to determining the value of the property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.
Here, the appraiser gathers information on local building costs, the cost of labor and other elements to calculate how much it would cost to build 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 predictor of value.
Paired Sales Analysis
Appraisers become very familiar with the subdivisions in which they appraise. They thoroughly understand the value of certain features to the homeowners of that area. Then, the appraiser looks up recent sales in the vicinity and finds properties which are 'comparable' to the property at hand. Using knowledge of the value of certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or additional storage space, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject property.
An opinion of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. When it comes to valuing features of homes in Scottsdale and Maricopa, Phoenix Valuations, LLC can't be beat. 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 - we may use a third way of valuing real estate. In this case, the amount of revenue the real estate produces is factored in with income produced by comparable properties to determine the current value.
Putting It All Together
Analyzing the data from all approaches, the appraiser is then ready to state an estimated market value for the subject property. Note: While this amount is probably the most accurate 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'. 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. Here's what it all boils down to, an appraiser from Phoenix Valuations, LLC will help you attain the most accurate property value, so you can make wise real estate decisions.