Home Appraisals: A Primer
A home purchase can be the most serious investment some of us could ever consider. Whether it's a main residence, a second vacation home or a rental fixer upper, purchasing real property is a detailed transaction that requires multiple people working in concert to make it all happen.
The majority of the parties participating are quite familiar. The most familiar face in the exchange is the real estate agent. Then, the lender provides the money needed to bankroll the exchange. And ensuring all requirements of the transaction are completed and that a clear title transfers to the buyer from the seller is the title company.
So, who makes sure the property is worth the purchase price? This is where the appraiser comes in. 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 Timeline Appraisal Services, LLC will ensure, you as an interested party, are informed.
The inspection is where an appraisal begins
Our first responsibility at Timeline Appraisal Services, LLC is to inspect the property to determine its true status. We must see features hands on, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed are there and are in the condition a typical person would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is correct and illustrating the layout of the property. Most importantly, the appraiser looks for any obvious amenities - or defects - that would affect the value of the house.
Once the site has been inspected, 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.
Here, the appraiser analyzes information on local building costs, labor rates and other factors to figure out how much it would cost to build a property comparable to the one being appraised. This estimate often sets the maximum on what a property would sell for. It's also the least used method.
Appraisers get to know the communities in which they appraise. They innately understand the value of specific features to the homeowners of that area. Then, the appraiser looks up recent sales in the vicinity and finds properties which are 'comparable' to the home in question. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, we add or subtract from each comparable's sales price so that they more accurately portray 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 Timeline Appraisal Services, LLC, we are an authority when it comes to knowing the worth of particular items in Scottsdale and Maricopa County neighborhoods. The sales comparison approach to value is commonly given the most consideration when an appraisal is for a home sale.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - we may use an additional way of valuing a house. In this situation, the amount of revenue the property yields is taken into consideration along with other rents in the area for comparable properties to determine the current value.
Putting It All Together
Combining information from all approaches, the appraiser is then ready to stipulate an estimated market value for the property in question. The estimate of value at the bottom of 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. Prices can always be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. But 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 Timeline Appraisal Services, LLC will help you get the most fair and balanced property value, so you can make wise real estate decisions.