What goes into an appraisal?Acquiring a house is the largest transaction some people might ever make. It doesn't matter if it's a main residence, an additional vacation home or an investment, the purchase of real property is a detailed transaction that requires multiple parties to see it through.
The majority of the participants are very familiar. The most familiar face in the exchange is the real estate agent. Next, the lender provides the financial capital needed to finance the transaction. The title company makes sure that all requirements of the sale are completed and that a clear title passes from the seller to the purchaser.
So who's responsible for making sure the value of the real estate is consistent with the purchase price? This is where you meet the appraiser. We provide an unbiased opinion of what a buyer could expect to pay - or a seller receive - for a property, where both buyer and seller are informed parties. A professional Arizona licensed appraiser from Metes & Bounds Valuation Services will ensure you as an interested party are informed.
Inspecting the subject propertyOur first responsibility at Metes & Bounds Valuation Services 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 truly are there and are in the condition a reasonable buyer would expect them to be. To ensure the stated size of the property is accurate and convey the layout of the property, the inspection often requires creating a sketch of the floor plan. Most importantly, we look for any obvious features - or defects - that would affect the value of the property.
Next, after the inspection, an appraiser uses two or three approaches to determining the value of the property: paired sales analysis and, in the case of a rental property, an income approach.
Replacement CostThis is where we analyze information on local construction costs, labor rates and other factors to figure out how much it would cost to construct a property comparable to the one being appraised. This value often 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 become very familiar with the neighborhoods in which they work. 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 property in question. By assigning a dollar value to 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 more accurately portray the features of subject.
After all differences have been accounted for, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At Metes & Bounds Valuation Services, we are an authority in knowing the worth of real estate features in Scottsdale and Maricopa County neighborhoods. The sales comparison approach to value is usually awarded the most importance when an appraisal is for a home exchange.
Valuation Using the Income ApproachA third method of valuing a house is sometimes used when a neighborhood has a measurable number of rental properties. In this scenario, the amount of income the property generates is taken into consideration along with income produced by nearby properties to determine the current value.
Coming Up With the Final ValueCombining information from all approaches, the appraiser is then ready to stipulate an estimated market value for the property at hand. The estimate of value at the bottom of the appraisal report is not necessarily the final sales price even though it is likely the best indication of a property's value Depending on the specific circumstances of the buyer or seller, their level of urgency or a buyer's desire for that exact property, the closing price of a home can always be driven up or down. Regardless, the appraised value is often used as a guideline for lenders who don't want to loan a buyer more money than they could recover in case they had to sell the property again. It all comes down to this: An appraiser from Metes & Bounds Valuation Services will guarantee you get the most accurate property value, so you can make the most informed real estate decisions.