Comprehending Appraisals

Acquiring a home can be the largest transaction most of us will 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 an involved financial transaction that requires multiple parties to pull it all off.

It's likely you are familiar with the parties having a role in the transaction. The real estate agent is the most known entity in the exchange. Then, the mortgage company provides the financial capital needed to finance the deal. And the title company makes sure that all areas of the sale are completed and that a clear title passes to the buyer from the seller.

To learn more about appraising, click here to see a short video or call us today to talk about your specific property.

So, what party makes sure the property is worth the amount being paid? 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 property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Valicity LLC will ensure, you as an interested party, are informed.

Inspecting the subject property

Our first responsibility at Valicity LLC 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, living areas, etc, to ensure they really are there and are in the shape a typical person would expect them to be. To make sure the stated size of the property is accurate and convey the layout of the house, the inspection often includes creating a sketch of the floorplan. Most importantly, we identify any obvious amenities - or defects - that would have an impact on the value of the property.

After the inspection, we use two or three approaches to determining the value of the property: sales comparison and, in the case of a rental property, an income approach.

Replacement Cost

This is where the appraiser analyzes information on local construction costs, the cost of labor and other factors to figure out how much it would cost to build a property comparable to the one being appraised. This value commonly sets the maximum on what a property would sell for. It's also the least used predictor of value.

Paired Sales Analysis

Appraisers can tell you a lot about the neighborhoods in which they appraise. They thoroughly understand the value of certain features to the residents 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 adjust the comparable properties so that they are more accurately in line with the features of subject.

  • For example, if the comparable property has a storm shelter and the subject does not, the appraiser may subtract the value of a storm shelter from the sales price of the comparable.
  • In the case where the subject has something such as an extra half bath that a comparable doesn't have, the appraiser might add the value of that bath to the comparable 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 Valicity LLC, we are experts when it comes to knowing the worth of particular items in Eureka and Humboldt County neighborhoods. The sales comparison approach to value is most often given the most importance when an appraisal is for a real estate exchange.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - we may use a third way of valuing a property. In this case, the amount of income the property generates is taken into consideration along with other rents in the area for comparable properties to give an indicator of the current value.

The Bottom Line

Combining information from all approaches, the appraiser is then ready to stipulate an estimated market value for the property at hand. It is important to note that while this amount is probably the strongest indication of what a property is worth, it may not be the final sales price. Depending on the specific situations 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 Valicity LLC will help you get the most fair and balanced property value, so you can make profitable real estate decisions.