What Goes Into an Appraisal?
Acquiring a home is the most serious transaction many of us will ever make. Whether it's where you raise your family, an additional vacation property or an investment, purchasing real property is an involved financial transaction that requires multiple people working in concert to make it all happen.
It's likely you are familiar with the parties having a role in the transaction. The most recognizable entity in the exchange is the real estate agent. Next, the bank provides the money needed to finance the deal. The title company makes sure that all areas of the transaction are completed and that the title is clear to pass from the seller to the purchaser.
So, who makes sure the property is worth the amount being paid? This is where the appraiser comes in. We provide an unbiased opinion 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 Nikko Lindley will ensure, you as an interested party, are informed.
Inspecting the subject property
To determine an accurate status of the property, it's our responsibility to first conduct a thorough inspection. We must physically see features, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly are present and are in the shape a typical person would expect them to be. To make sure the stated square footage has not been misrepresented and illustrate the layout of the home, 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 house.
Back at the office, we use 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.
Here, we analyze information on local building costs, the cost of labor and other factors to ascertain how much it would cost to replace the property being appraised. This value usually sets the upper limit on what a property would sell for. It's also the least used method.
Analyzing Comparable Sales
Appraisers become very familiar with the communities in which they appraise. They innately understand the value of particular features to the residents of that area. Then, the appraiser researches recent transactions in the vicinity and finds properties which are 'comparable' to the home in question. By assigning a dollar value to certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or extra storage space, we add or subtract from each comparable's sales price so that they more accurately match the features of subject.
Once all necessary adjustments have been made, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At Nikko Lindley, we are an authority in knowing the value of real estate features in Oakland and Alameda County neighborhoods. This approach to value is usually given the most consideration when an appraisal is for a home exchange.
Valuation Using the Income Approach
A third way of valuing approach to value is sometimes applied when a neighborhood has a measurable number of renter occupied properties. In this scenario, the amount of revenue the property produces is taken into consideration along with other rents in the area for comparable properties to determine the current value.
Putting It All Together
Combining information from all 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 the appraised value is probably the most reliable indication of what a house is worth, it may not be the final sales price. 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.But the appraised value is typically 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. Here's what it all boils down to, an appraiser from Nikko Lindley will guarantee you discover the most accurate property value, so you can make the most informed real estate decisions.