What Are the Parts of an Appraisal?
A home purchase is the most significant investment many of us will ever make. It doesn't matter if a main residence, an additional vacation property or one of many rentals, purchasing real property is a complex financial transaction that requires multiple parties to see it through.
Most people are familiar with the parties having a role in the transaction. The real estate agent is the most recognizable entity in the transaction. Then, the mortgage company provides the financial capital needed to finance the transaction. The title company ensures that all requirements of the exchange are completed and that the title is clear to pass from the seller to the purchaser.
So, what party is responsible for making sure the property is worth the purchase price? This is where you meet 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 licensed, certified, professional appraiser from Piscitelli Appraisal Service will ensure, you as an interested party, are informed.
Appraisals start with the property inspection
Our first responsibility at Piscitelli Appraisal Service is to inspect the property to determine its true status. We must physically see aspects of the property, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really are there and are in the condition a typical buyer 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 look for any obvious amenities - or defects - that would affect the value of the house.
Once the site has been inspected, an appraiser uses two or three approaches to determining the value of the property: sales comparison and, in the case of a rental property, an income approach.
Here, the appraiser gathers information on local building costs, labor rates and other elements to calculate how much it would cost to construct a property comparable to the one being appraised. This figure usually sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.
Paired Sales Analysis
Appraisers are intimately familiar with the communities in which they appraise. They innately understand the value of specific features to the people of that area. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are 'comparable' to the home at hand. Using knowledge of the value of certain items such as square footage, additional bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we adjust the comparable properties so that they more accurately match the features of subject property.
After all differences have been accounted for, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. When it comes to putting a value on features of homes in Oak Park and Ventura, Piscitelli Appraisal Service is your local authority. The sales comparison approach to value is most often given the most consideration when an appraisal is for a real estate sale.
Valuation Using the Income Approach
A third method of valuing a property is sometimes applied when a neighborhood has a reasonable number of rental properties. In this scenario, the amount of income the real estate generates is taken into consideration along with income produced by similar properties to derive the current value.
Putting It All Together
Combining information from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the property in question. It is important to note that while the appraised value is probably the best indication of what a property is worth, 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 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 Piscitelli Appraisal Service will guarantee you get the most accurate property value, so you can make wise real estate decisions.