What Are the Parts of an Appraisal?Buying real estate is the biggest transaction most people may ever make. It doesn't matter if where you raise your family, an additional vacation home or an investment, the purchase of real property is an involved financial transaction that requires multiple people working in concert to make it all happen. Practically all the participants are quite familiar. The most familiar face in the exchange is the real estate agent. Then, the bank provides the financial capital necessary to fund the exchange. And ensuring all areas of the transaction are completed and that the title is clear to transfer from the seller to the purchaser is the title company. So, what party is responsible for making sure the value of the property is in line with the purchase price? This is where you meet the appraiser. We provide an unbiased opinion of what a buyer could expect to pay — or a seller receive — for a property, 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 actually see features, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really are present and are in the condition 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, the appraiser identifies any obvious features - or defects - that would have an impact on the value of the house. After the inspection, an appraiser uses two or three approaches to determining the value of the property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent. 
Replacement CostHere, the appraiser analyzes information on local building costs, the cost of labor and other factors to calculate how much it would cost to replace the property being appraised. This estimate often sets the maximum on what a property would sell for. The cost approach is also the least used method. 
Paired Sales AnalysisAppraisers are intimately familiar with the subdivisions in which they work. 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 subject being appraised. 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 are more accurately in line with 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. When it comes to valuing features of homes in Woodland Hills and Los Angeles, All City Appraisal is second to none. This approach to value is most often awarded the most importance when an appraisal is for a home purchase. Valuation Using the Income ApproachIn 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 income the property yields is factored in with income produced by comparable properties to determine the current value. Coming Up With The Final ValueAnalyzing the data from all applicable approaches, the appraiser is then ready to put down an estimated market value for the property at hand. 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. Depending on the individual circumstances of the buyer or seller, their level of urgency or a buyer's desire for that exact property, the closing price of a home can always be driven up or down.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. The bottom line is, an appraiser from All City Appraisal will guarantee you attain the most accurate property value, so you can make profitable real estate decisions. |