Comprehending Appraisals

A home purchase can be the biggest transaction some could ever consider. Whether it's a main residence, an additional vacation property or one of many rentals, the purchase of real property is a complex transaction that requires multiple parties to see it through.

Most of the parties involved are very familiar. The most familiar face in the exchange is the real estate agent. Then, the mortgage company provides the financial capital required to fund the exchange. And ensuring all details of the transaction are completed and that the title is clear to pass from the seller to the buyer is the title company.

To learn more about appraising, click here to see a short video or call us today to talk about your specific property.

So, what party is responsible for making sure the value of the real estate is in line with 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 John C Mangen will ensure, you as an interested party, are informed.

Inspecting the subject property

To ascertain an accurate status of the property, it's our responsibility 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, amenities, etc., to ensure they truly are there and are in the shape a reasonable person would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is correct and illustrating the layout of the property. Most importantly, the appraiser identifies any obvious features - 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.

Replacement Cost

Here, the appraiser analyzes information on local building costs, labor rates and other elements to determine how much it would cost to replace the property being appraised. This value commonly 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 get to know the subdivisions in which they work. They thoroughly understand the value of specific features to the residents of that area. Then, the appraiser researches recent sales in the neighborhood and finds properties which are 'comparable' to the subject at hand. Using knowledge of the value of certain items such as upgraded appliances, additional bathrooms, additional living area, quality of construction, lot size, we add or subtract from each comparable's sales price so that they more accurately portray the features of subject property.

  • Say, for example, the comparable property has an irrigation system and the subject does not, the appraiser may subtract the value of an irrigation system from the sales price of the comparable.
  • However, if the subject has an extra half-bathroom and the comparable does not, the appraiser might add a certain amount to the comparable property.

An opinion of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. When it comes to knowing the true worth of features of homes in Tucson and Pima, John C Mangen can't be beat. The sales comparison approach to value is typically given the most weight when an appraisal is for a home purchase.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - the appraiser may use a third approach to value. In this case, the amount of income the property produces is factored in with other rents in the area for comparable properties to give an indicator of the current value.

Reconciliation

Examining the data from all 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 necessarily the final sales price even though it is likely the best indication of what a property is worth. Depending on the specific situations 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 employed 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 John C Mangen will guarantee you attain the most accurate property value, so you can make profitable real estate decisions.