Real Estate Appraisals: A Primer
Acquiring real estate can be the largest transaction many of us may ever consider. It doesn't matter if where you raise your family, a second vacation home or one of many rentals, the purchase of real property is an involved transaction that requires multiple parties to pull it all off.
You're probably familiar with the parties taking part in the transaction. The most familiar person in the exchange is the real estate agent. Then, the bank provides the money necessary to fund the exchange. And ensuring all requirements of the sale are completed and that the title is clear to pass to the buyer from the seller is the title company.
So, who's responsible for making sure the real estate 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 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.
Inspecting the subject property
Our first duty at Timeline Appraisal Services, LLC is to inspect the property to determine its true status. We must actually see aspects of the property, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they really exist and are in the condition a reasonable person would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is correct and conveying the layout of the property. Most importantly, the appraiser looks for any obvious features - or defects - that would affect the value of the house.
Once the site has been inspected, an appraiser uses two or three approaches to determining the value of real property: paired sales analysis and, in the case of a rental property, an income approach.
This is where we gather information on local building costs, the cost of labor and other elements to figure out how much it would cost to replace the property being appraised. This estimate often sets the upper limit on what a property would sell for. It's also the least used method.
Analyzing Comparable Sales
Appraisers can tell you a lot about the neighborhoods in which they appraise. They innately understand the value of certain features to the homeowners 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 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 adjust the comparable properties so that they more accurately match the features of subject.
A valid estimate of what the subject could 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 real estate features in Scottsdale and Maricopa County neighborhoods. This approach to value is usually given the most importance when an appraisal is for a home sale.
Valuation Using the Income Approach
A third way of valuing a house is sometimes used when an area has a reasonable number of rental properties. In this situation, the amount of revenue the real estate generates is factored in with other rents in the area for comparable properties to give an indicator of the current value.
Combining information 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. It's not uncommon for prices to 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 employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. At the end of the day, 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.