Comprehending AppraisalsA home purchase can be the most serious financial decision many of us might ever encounter. Whether it's where you raise your family, a second vacation home or an investment, purchasing real property is a detailed transaction that requires multiple people working in concert to make it all happen. Most of the participants are quite familiar. The real estate agent is the most familiar entity in the transaction. Then, the bank provides the money necessary to fund the transaction. The title company makes sure that all requirements of the sale are completed and that a clear title transfers from the seller to the buyer. So, who's responsible for making sure the property is worth the amount being paid? In comes the appraiser. We provide an unbiased estimate of what a buyer could expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from JMS Appraisal will ensure, you as an interested party, are informed. Inspecting the subject propertyOur first responsibility at JMS Appraisal is to inspect the property to ascertain its true status. We must physically view features, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed exist and are in the condition a reasonable 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 entails creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious features - or defects - that would affect the value of the property. 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. Replacement CostHere, the appraiser analyzes information on local construction costs, the cost of labor and other factors to calculate how much it would cost to construct a property nearly identical to the one being appraised. This value commonly sets the upper limit on what a property would sell for. The cost approach is also the least used predictor of value. Paired Sales AnalysisAppraisers can tell you a lot about the neighborhoods in which they work. They thoroughly understand the value of specific features to the homeowners of that area. Then, the appraiser researches recent transactions in close proximity to the subject and finds properties which are 'comparable' to the subject at hand. By assigning a dollar value to certain items such as fireplaces, room layout, appliance upgrades, extra bathrooms or bedrooms, or quality of construction, we add or subtract from each comparable's sales price so that they more accurately match the features of subject.
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 JMS Appraisal, we are experts when it comes to knowing the worth of particular items in Aliso Viejo and Orange County neighborhoods. This approach to value is commonly awarded the most importance when an appraisal is for a real estate exchange. Valuation Using the Income ApproachA third method of valuing approach to value is sometimes used when a neighborhood has a measurable number of rental properties. In this scenario, the amount of revenue the property generates is factored in with income produced by nearby properties to give an indicator of the current value. The Bottom LineCombining information from all approaches, the appraiser is then ready to put down an estimated market value for the property at hand. Note: While the appraised value is probably the most reliable 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'. But the appraised value is typically used 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 JMS Appraisal will guarantee you attain the most accurate property value, so you can make wise real estate decisions. |