What Is an Appraisal?
A home purchase is the biggest transaction some may ever consider. It doesn't matter if a main residence, a second vacation property or an investment, purchasing real property is an involved financial transaction that requires multiple parties to pull it all off.
Most people are familiar with the parties taking part in the transaction. The most recognizable person in the exchange is the real estate agent. Next, the bank provides the money needed to bankroll the deal. And ensuring all requirements of the exchange are completed and that a clear title transfers to the buyer from the seller is the title company.
So, who's responsible for making sure the value of the property is in line 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 licensed, certified, professional appraiser from ASAP Appraisal Services, Inc. will ensure, you as an interested party, are informed.
Appraisals start with the inspection
To ascertain an accurate status of the property, it's our duty to first complete a thorough inspection. We must physically view features, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they indeed are there 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 proper and conveying the layout of the property. Most importantly, we identify any obvious amenities - or defects - that would affect the value of the property.
After the inspection, 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.
This is where the appraiser uses information on local construction costs, the cost of labor and other factors to determine how much it would cost to construct a property nearly identical to the one being appraised. This estimate commonly sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.
Appraisers get to know the subdivisions in which they appraise. They innately understand the value of certain features to the people of that area. Then, the appraiser looks up recent sales 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 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 more accurately portray the features of subject property.
A true 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 ASAP Appraisal Services, Inc., we are an authority when it comes to knowing the value of particular items in Mesa and Maricopa County neighborhoods. This approach to value is most often given the most weight when an appraisal is for a real estate sale.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - the appraiser may use a third way of valuing a property. In this situation, the amount of revenue the real estate yields is factored in with income produced by similar properties to give an indicator of the current value.
Analyzing the data from all applicable approaches, the appraiser is then ready to document an estimated market value for the subject property. The estimate of value at the bottom of the appraisal report is not always what's being paid for the property even though it is likely the best indication of what a property is worth. 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'. But the appraised value is typically employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. At the end of the day, an appraiser from ASAP Appraisal Services, Inc. will guarantee you get the most fair and balanced property value, so you can make wise real estate decisions.