A Description of the Appraisal Process
A home purchase is the most serious transaction many people might ever consider. It doesn't matter if a main residence, a second vacation home or one of many rentals, the purchase of real property is a complex transaction that requires multiple parties to see it through.
The majority of the people participating are very familiar. The most familiar face in the transaction is the real estate agent. Next, the bank provides the financial capital needed to finance the transaction. And ensuring all aspects of the exchange are completed and that the title is clear to transfer from the seller to the purchaser is the title company.
So, who's responsible for making sure the real estate is worth the purchase price? This is where you meet the appraiser. 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 Phoenix Valuations, LLC will ensure, you as an interested party, are informed.
The inspection is where an appraisal begins
Our first duty 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, living areas, etc, to ensure they really are present and are in the shape a reasonable person would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is correct and conveying 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.
Once the site has been inspected, we use two or three approaches to determining the value of real property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.
Here, the appraiser analyzes information on local construction costs, labor rates and other elements to determine how much it would cost to construct a property comparable to the one being appraised. This figure usually sets the upper limit on what a property would sell for. It's also the least used predictor of value.
Analyzing Comparable Sales
Appraisers can tell you a lot about the communities 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 the vicinity and finds properties which are 'comparable' to the real estate being appraised. By assigning a dollar value to 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 more accurately portray the features of subject.
In the end, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At Phoenix Valuations, LLC, we are experts in knowing the worth of particular items in Scottsdale and Maricopa County neighborhoods. The sales comparison approach to value is typically given the most importance when an appraisal is for a real estate exchange.
Valuation Using the Income Approach
A third method of valuing real estate is sometimes applied when an area has a measurable number of rental properties. In this situation, the amount of income the property produces is taken into consideration along with other rents in the area for comparable properties to derive the current value.
Putting It All Together
Examining the data from all applicable approaches, the appraiser is then ready to document an estimated market value for the property in question. Note: While this amount is probably the most reliable indication of what a house is worth, it may not be the price at which the property closes. 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 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 guarantee you attain the most fair and balanced property value, so you can make the most informed real estate decisions.