What Are the Components of an Appraisal?
A home purchase is the most serious financial decision some could ever encounter. Whether it's a primary residence, an additional vacation property or an investment, the purchase of real property is a detailed financial transaction that requires multiple people working in concert to make it all happen.
Most people are familiar with the parties having a role in the transaction. The real estate agent is the most known face in the exchange. Then, the lender provides the money required to bankroll the exchange. And ensuring all requirements of the sale are completed and that the title is clear to transfer from the seller to the purchaser is the title company.
So, who makes sure the value of the real estate is consistent with the purchase price? In comes 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 Antares Real Estate Management will ensure, you as an interested party, are informed.
Inspecting the subject property
To determine the true status of the property, it's our responsibility to first conduct a thorough inspection. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they indeed exist and are in the condition a reasonable buyer would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is correct and conveying the layout of the property. Most importantly, the appraiser identifies any obvious amenities - or defects - that would affect the value of the house.
Following the inspection, an appraiser uses two or three approaches to determining the value of real property: sales comparison and, in the case of a rental property, an income approach.
This is where the appraiser pulls information on local construction costs, labor rates and other elements to figure out how much it would cost to construct a property nearly identical to the one being appraised. This figure often sets the upper limit on what a property would sell for. The cost approach is also the least used method.
Appraisers become very familiar with the communities in which they work. They innately understand the value of specific features to the residents of that area. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are 'comparable' to the home at hand. By assigning a dollar value to certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or additional storage space, we adjust the comparable properties so that they more accurately match the features of subject property.
A true estimate of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. At Antares Real Estate Management, we are an authority when it comes to knowing the value of real estate features in Oakland and Orange County neighborhoods. The sales comparison approach to value is most often given the most importance when an appraisal is for a home purchase.
Valuation Using the Income Approach
A third way of valuing a property is sometimes applied when a neighborhood has a reasonable number of rental properties. In this situation, the amount of revenue the property produces is factored in with income produced by nearby properties to give an indicator of the current value.
Combining information from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. Note: While this amount is probably the most reliable indication of what a house is worth, it may not be the final sales price. There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust an offer or listing price up or down. Regardless, the appraised value is often employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. It all comes down to this, an appraiser from Antares Real Estate Management will guarantee you attain the most accurate property value, so you can make the most informed real estate decisions.