Comprehending Appraisals

Their home's purchase is the most significant financial decision most people may ever consider. It doesn't matter if where you raise your family, an additional vacation home or a rental fixer upper, the purchase of real property is an involved financial transaction that requires multiple parties to see it through.

Practically all the people participating are quite familiar. The most recognizable person in the exchange is the real estate agent. Then, the mortgage company provides the financial capital necessary to bankroll the transaction. And the title company makes sure that all areas of the exchange are completed and that a clear title transfers 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 is responsible for making sure the value of the real estate is in line with 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 parcel of real estate, 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

To determine the true status of the property, it's our duty to first perform a thorough inspection. We must physically view features, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they really are present and are in the condition a reasonable person would expect them to be. To make sure the stated square footage is accurate and document the layout of the house, the inspection often entails creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious amenities - or defects - that would have an impact on the value of the house.

Following the inspection, we use two or three approaches to determining the value of real property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.

Cost Approach

Here, the appraiser uses information on local building costs, the cost of labor and other elements to calculate how much it would cost to construct a property comparable to the one being appraised. This estimate usually sets the upper limit on what a property would sell for. The cost approach is also the least used predictor of value.

Analyzing Comparable Sales

Appraisers get to know the communities in which they work. They thoroughly understand the value of certain features to the residents of that area. Then, the appraiser researches recent sales in the vicinity and finds properties which are 'comparable' to the property being appraised. By assigning a dollar value to certain items such as fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, we adjust the comparable properties so that they more accurately match the features of subject.

  • For example, if the comparable property has an irrigation system and the subject doesn't, the appraiser may deduct the value of an irrigation system from the sales price of the comparable.
  • If the subject property has an extra half-bathroom and the comparable does not, the appraiser might add a certain amount to the comparable property.

An opinion of what the subject could 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 Eureka and Humboldt, Valicity LLC is second to none. The sales comparison approach to value is usually given the most importance when an appraisal is for a home purchase.

Valuation Using the Income Approach

A third way of valuing approach to value is sometimes applied when an area has a reasonable number of rental properties. In this scenario, the amount of revenue the property generates is factored in with income produced by similar properties to determine the current value.

Coming Up With The Final Value

Examining the data from all applicable approaches, the appraiser is then ready to document an estimated market value for the property in question. Note: While the appraised value is probably the best indication of what a house is worth, it may not be the final sales price. Prices can always 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 they could get back in case they had to sell the property again. At the end of the day, an appraiser from Valicity LLC will guarantee you discover the most fair and balanced property value, so you can make the most informed real estate decisions.