Real Estate Appraisals: A Primer
Getting real estate can be the largest investment some people will ever consider. Whether it's a primary residence, an additional vacation home or an investment, the purchase of real property is an involved transaction that requires multiple parties to make it all happen.
Most people are familiar with the parties having a role in the transaction. The most known face in the exchange is the real estate agent. Next, the bank provides the money necessary to finance the deal. The title company makes sure that all details of the exchange are completed and that a clear title transfers from the seller to the buyer.
So, who makes sure the value of the property is in line with the amount being paid? This is where the appraiser comes in. We provide an unbiased opinion of what a buyer might 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 AZCO Appraisals, LLC will ensure, you as an interested party, are informed.
The inspection is where an appraisal starts
Our first responsibility at AZCO Appraisals, LLC is to inspect the property to ascertain its true status. We must actually see features, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really are present and are in the condition a typical person would expect them to be. To ensure the stated size of the property is accurate and describe the layout of the property, the inspection often includes creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious amenities - or defects - that would affect the value of the property.
Once the site has been inspected, 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 gathers information on local construction costs, labor rates and other factors to figure out how much it would cost to replace the property being appraised. This figure usually sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.
Analyzing Comparable Sales
Appraisers are intimately 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 researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the property being appraised. Using knowledge of the value of certain items such as square footage, additional bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we adjust the comparable properties so that they are more accurately in line with the features of subject.
An opinion of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. At AZCO Appraisals, LLC, we are experts in knowing the worth of real estate features in Flagstaff and Coconino County neighborhoods. This approach to value is usually awarded the most consideration when an appraisal is for a real estate sale.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - the appraiser may use a third way of valuing a house. In this situation, the amount of income the real estate generates is taken into consideration along with other rents in the area for comparable properties to determine the current value.
Combining information from all applicable approaches, the appraiser is then ready to put down an estimated market value for the property in question. The estimate of value on the appraisal report is not always what's being paid for the property even though it is likely the best indication of a property's valueThere are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust the final 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 they could get back in the event they had to sell the property again. At the end of the day, an appraiser from AZCO Appraisals, LLC will guarantee you discover the most fair and balanced property value, so you can make profitable real estate decisions.