What Are the Parts of an Appraisal?

Acquiring real estate can be the most serious financial decision many people could ever make. It doesn't matter if a main residence, an additional vacation home or a rental fixer upper, purchasing real property is a detailed transaction that requires multiple people working in concert to pull it all off.

The majority of the participants are very familiar. The real estate agent is the most familiar entity in the exchange. Next, the bank provides the money needed to finance the deal. The title company makes sure that all aspects of the transaction are completed and that the title is clear to transfer 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 property is worth the purchase price? In comes 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 licensed, certified, professional appraiser from MGK Properties will ensure, you as an interested party, are informed.

Appraisals start with the inspection

To determine the true status of the property, it's our duty to first perform a thorough inspection. We must actually view features, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they truly are there and are in the shape a typical buyer would expect them to be. To make sure the stated size of the property has not been misrepresented and illustrate the layout of the house, the inspection often requires creating a sketch of the floorplan. Most importantly, we look for any obvious features - or defects - that would have an impact on the value of the house.

Back at the office, 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 Cost

This is where the appraiser analyzes information on local construction costs, the cost of labor and other factors to calculate how much it would cost to replace the property being appraised. This estimate commonly sets the maximum on what a property would sell for. The cost approach is also the least used method.

Sales Comparison

Appraisers are intimately familiar with the neighborhoods in which they appraise. They innately understand the value of particular features to the residents of that area. Then, the appraiser looks up recent sales in close proximity to the subject and finds properties which are 'comparable' to the home in question. Using knowledge of the value of certain items such as upgraded appliances, extra bathrooms, additional living area, quality of construction, lot size, we adjust the comparable properties so that they more accurately match the features of subject.

  • For example, if the comparable property has an extra half bath that the subject does not, the appraiser may deduct the value of that half bath from the sales price of the comparable home.
  • 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 could 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 Hemet and Riverside, MGK Properties can't be beat. This approach to value is commonly awarded the most importance when an appraisal is for a home sale.

Valuation Using the Income Approach

A third way of valuing a house is sometimes employed when a neighborhood has a measurable number of renter occupied properties. In this scenario, the amount of revenue the real estate yields is taken into consideration along with other rents in the area for comparable properties to determine the current value.

Coming Up With The Final Value

Analyzing the data from all applicable approaches, the appraiser is then ready to put down an estimated market value for the subject property. 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 valuePrices can always be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. Regardless, the appraised value is typically employed as a guideline for lenders who don't want to loan a buyer more money than they could get back in case they had to sell the property again. It all comes down to this, an appraiser from MGK Properties will help you get the most fair and balanced property value, so you can make the most informed real estate decisions.