Buying a home is the most important investment most people might ever encounter. It doesn't matter if where you raise your family, a seasonal 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 taking part in the transaction. The real estate agent is the most recognizable face in the transaction. Next, the bank provides the money required to finance the transaction. And ensuring all requirements of the exchange are completed and that the title is clear to transfer to the buyer from the seller is the title company.
So, who's responsible for making sure the real estate is worth the purchase price? This is where you meet the appraiser. We provide an unbiased estimate of what a buyer could expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Timeline Appraisal Services, LLC will ensure, you as an interested party, are informed.
The inspection is where an appraisal starts
To determine the true status of the property, it's our responsibility to first conduct a thorough inspection. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they truly exist and are in the condition a typical buyer would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is accurate and illustrating the layout of the property. Most importantly, we look for any obvious amenities - or defects - that would have an impact on the value of the property.
Back at the office, we use two or three approaches to determining the value of the property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.
This is where the appraiser uses information on local building costs, the cost of labor and other elements to calculate how much it would cost to replace the property being appraised. This estimate commonly sets the upper limit on what a property would sell for. The cost approach is also the least used method.
Paired Sales Analysis
Appraisers become very familiar with the neighborhoods in which they appraise. They thoroughly understand the value of specific features to the people 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. Using knowledge of the value of certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or additional storage space, we adjust the comparable properties so that they are more accurately in line with 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 Timeline Appraisal Services, LLC, we are experts in knowing the value of particular items in Scottsdale and Maricopa County neighborhoods. The sales comparison approach to value is typically awarded the most importance when an appraisal is for a home purchase.
Valuation Using the Income Approach
A third way of valuing real estate is sometimes applied when an area has a measurable number of rental properties. In this scenario, 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 approaches, the appraiser is then ready to state an estimated market value for the property at hand. 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 what a property is worth. Depending on the individual 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 typically used 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 Timeline Appraisal Services, LLC will help you attain the most accurate property value, so you can make profitable real estate decisions.