Real Property Appraisals: A PrimerA home purchase is the biggest transaction most of us will ever make. It doesn't matter if a primary residence, a seasonal vacation property or a rental fixer upper, the purchase of real property is a detailed transaction that requires multiple people working in concert to make it all happen. You're likely to be familiar with the parties having a role in the transaction. The most recognizable entity in the exchange is the real estate agent. Next, the mortgage company provides the money necessary to bankroll the deal. And ensuring all areas of the transaction are completed and that a clear title transfers 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? In comes the appraiser. We provide an unbiased opinion 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 All City Appraisal will ensure, you as an interested party, are informed. Appraisals begin with the property inspectionOur first duty at All City Appraisal is to inspect the property to determine its true status. We must see features first hand, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they truly are there and are in the shape a reasonable buyer would expect them to be. To ensure the stated square footage has not been misrepresented and document the layout of the home, the inspection often includes creating a sketch of the floorplan. Most importantly, the appraiser looks for any obvious features - or defects - that would have an impact on the value of the house. Back at the office, an appraiser uses 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. 
Cost ApproachHere, we analyze information on local construction costs, the cost of labor and other elements to figure out how much it would cost to build a property similar to the one being appraised. This estimate usually sets the upper limit on what a property would sell for. It's also the least used method. 
Analyzing Comparable SalesAppraisers can tell you a lot about the neighborhoods in which they work. They thoroughly understand the value of particular features to the residents of that area. Then, the appraiser researches recent sales in the neighborhood and finds properties which are 'comparable' to the home at hand. By assigning a dollar value to certain items such as square footage, extra bathrooms, hardwood floors, fireplaces or view lots (just to name a few), 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 might sell for can only be determined once all differences between the comps and the subject have been evaluated. At All City Appraisal, we are an authority in knowing the worth of real estate features in Woodland Hills and Los Angeles County neighborhoods. This approach to value is commonly awarded the most weight when an appraisal is for a home exchange. Valuation Using the Income ApproachIn the case of income producing properties - rental houses for example - we may use a third way of valuing a house. In this case, the amount of revenue the real estate yields is factored in with income produced by comparable properties to determine the current value. Coming Up With The Final ValueExamining the data from all approaches, the appraiser is then ready to put down an estimated market value for the property at hand. The estimate of value on the appraisal report is not necessarily 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'. Regardless, the appraised value is typically employed as a guideline for lenders who don't want to loan a buyer more money than they could get back in the event they had to sell the property again. The bottom line is, an appraiser from All City Appraisal will help you discover the most accurate property value, so you can make profitable real estate decisions. |