Making Sense of the Appraisal Process
Purchasing a house can be the most significant transaction many might ever make. Whether it's where you raise your family, a seasonal vacation home or one of many rentals, purchasing real property is an involved financial transaction that requires multiple parties to pull it all off.
Most of the people participating are very familiar. The most known person in the exchange is the real estate agent. Next, the lender provides the money needed to finance the deal. And ensuring all aspects of the transaction are completed and that a clear title passes from the seller to the buyer is the title company.
So, who makes sure the real estate is worth the amount being paid? This is where you meet the appraiser. We provide an unbiased opinion 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 Chris Circuit will ensure, you as an interested party, are informed.
The inspection is where an appraisal starts
Our first duty at Chris Circuit is to inspect the property to ascertain its true status. We must actually view features, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they indeed are present and are in the condition a typical buyer would expect them to be. To ensure the stated square footage has not been misrepresented and describe the layout of the house, the inspection often includes 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.
Next, 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.
This is where the appraiser uses information on local construction costs, the cost of labor and other elements to ascertain how much it would cost to replace the property being appraised. This estimate commonly sets the maximum on what a property would sell for. It's also the least used method.
Appraisers get to know the neighborhoods in which they work. They thoroughly understand the value of specific features to the people of that area. Then, the appraiser looks up recent transactions in the area and finds properties which are 'comparable' to the subject at hand. By assigning a dollar value to certain items such as square footage, additional 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 more accurately match the features of subject.
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. When it comes to putting a value on features of homes in San Diego and San Diego, Chris Circuit is your local authority. This approach to value is typically given the most importance when an appraisal is for a home sale.
Valuation Using the Income Approach
A third way of valuing approach to value is sometimes applied when an area has a reasonable number of renter occupied properties. In this situation, the amount of income the real estate generates is taken into consideration along with income produced by neighboring properties to give an indicator of the current value.
Putting It All Together
Combining information from all approaches, the appraiser is then ready to state an estimated market value for the property at hand. The estimate of value at the bottom of the appraisal report is not necessarily the final sales price even though it is likely the best indication of a property's valueDepending 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.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 recover in case they had to sell the property again. It all comes down to this, an appraiser from Chris Circuit will help you attain the most accurate property value, so you can make wise real estate decisions.