A home purchase can be the largest financial decision many of us may ever make. It doesn't matter if where you raise your family, an additional vacation property or a rental fixer upper, purchasing real property is an involved transaction that requires multiple parties to make it all happen.
It's likely you are familiar with the parties having a role in the transaction. The real estate agent is the most known entity in the transaction. Next, the lender provides the money needed to finance the deal. And ensuring all requirements of the exchange are completed and that a clear title transfers from the seller to the purchaser is the title company.
So, what party is responsible for making sure the real estate is worth the purchase price? In comes the appraiser. We provide an unbiased opinion of what a buyer might expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Harris Valuation Solutions will ensure, you as an interested party, are informed.
Inspecting the subject property
To ascertain an accurate status of the property, it's our duty to first perform a thorough inspection. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they really are there 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 home, the inspection often includes creating a sketch of the floorplan. Most importantly, we look for any obvious features - or defects - that would have an impact on the value of the house.
Next, after the inspection, an appraiser uses two or three approaches to determining the value of the property: sales comparison and, in the case of a rental property, an income approach.
This is where we gather information on local construction costs, the cost of labor and other factors to determine how much it would cost to replace the property being appraised. This estimate usually sets the maximum on what a property would sell for. The cost approach is also the least used method.
Paired Sales Analysis
Appraisers are intimately familiar with the subdivisions in which they appraise. They innately understand the value of certain 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 real estate at hand. By assigning a dollar value to certain items such as square footage, extra 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 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 Harris Valuation Solutions, we are an authority in knowing the value of real estate features in Palm Desert and Riverside County neighborhoods. This approach to value is commonly given the most weight when an appraisal is for a real estate purchase.
Valuation Using the Income Approach
A third method of valuing real estate is sometimes used when an area has a measurable number of renter occupied properties. In this scenario, the amount of income the property yields is taken into consideration along with other rents in the area for comparable properties to determine the current value.
The Bottom Line
Analyzing the data from all applicable approaches, the appraiser is then ready to put down an estimated market value for the property at hand. It is important to note that while this amount is probably the most reliable indication of what a house is worth, it probably will not be the price at which the property closes. Prices can always 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 used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. Here's what it all boils down to, an appraiser from Harris Valuation Solutions will guarantee you discover the most fair and balanced property value, so you can make wise real estate decisions.