A Description of the Appraisal Process

A home purchase can be the largest financial decision some people might ever make. It doesn't matter if a main residence, an additional vacation property or a rental fixer upper, the purchase of real property is a complex financial transaction that requires multiple people working in concert to see it through.

Most of the participants are very familiar. The real estate agent is the most known face in the exchange. Next, the mortgage company provides the financial capital required to finance the deal. And the title company ensures that all areas of the exchange are completed and that the title is clear to pass from the seller to the purchaser.

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

So, who's responsible for making sure the value of the property 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 MGK Properties will ensure, you as an interested party, are informed.

The inspection is where an appraisal begins

Our first responsibility at MGK Properties is to inspect the property to determine its true status. We must physically view aspects of the property, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly are present and are in the condition a reasonable buyer would expect them to be. To ensure the stated square footage has not been misrepresented and convey the layout of the property, the inspection often entails creating a sketch of the floorplan. Most importantly, we look for any obvious amenities - or defects - that would affect the value of the house.

Following the inspection, we use two or three approaches to determining the value of real property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.

Cost Approach

Here, we analyze information on local building costs, labor rates and other elements 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.

Paired Sales Analysis

Appraisers can tell you a lot about the subdivisions in which they appraise. They thoroughly understand the value of particular features to the residents of that area. Then, the appraiser looks up recent transactions in the area and finds properties which are 'comparable' to the property 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 match the features of subject property.

  • Say, for example, the comparable property has an extra half bath that the subject does not, the appraiser may subtract the value of that half bath from the sales price of the comparable home.
  • However, in the case where the subject has something such as an extra half bath that a comparable doesn't have, the appraiser might add the value of that bath to the comparable property.

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. When it comes to knowing the true value of features of homes in Hemet and Riverside, MGK Properties is second to none. The sales comparison approach to value is commonly given the most weight when an appraisal is for a real estate sale.

Valuation Using the Income Approach

A third method of valuing real estate is sometimes employed when a neighborhood has a reasonable number of renter occupied properties. In this scenario, the amount of income the real estate generates is factored in with other rents in the area for comparable properties to determine 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 always the final sales price even though it is likely the best indication of a property's valueDepending on the individual 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 typically used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. The bottom line is, an appraiser from MGK Properties will help you attain the most fair and balanced property value, so you can make profitable real estate decisions.