What Is an Appraisal?

Their home's purchase is the biggest financial decision many people will ever make. Whether it's where you raise your family, an additional vacation home or an investment, the purchase of real property is a complex transaction that requires multiple parties to see it through.

Most people are familiar with the parties having a role in the transaction. The most known entity in the transaction is the real estate agent. Next, the bank provides the financial capital necessary to bankroll the deal. And ensuring all aspects of the sale are completed and that the title is clear to transfer from the seller to the buyer is the title company.

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So, what party is responsible for making sure the value of the real estate is in line with 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 property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Independent Appraisal will ensure, you as an interested party, are informed.

Appraisals start with the inspection

Our first task at Independent Appraisal is to inspect the property to ascertain its true status. We must physically view features, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they truly exist 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 accurate and illustrating the layout of the property. Most importantly, the appraiser identifies any obvious amenities - or defects - that would have an impact on the value of the house.

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

Replacement Cost

Here, the appraiser analyzes information on local construction costs, the cost of labor and other elements to derive how much it would cost to build a property comparable to the one being appraised. This estimate usually 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 particular features to the homeowners of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the home being appraised. By assigning a dollar value to certain items such as upgraded appliances, extra bathrooms, additional living area, quality of construction, lot size, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject.

  • For example, if the comparable property has a fireplace and the subject doesn't, the appraiser may deduct the value of a fireplace from the sales price of the comparable.
  • If the subject has an extra half-bathroom and the comparable does not, the appraiser might add a certain amount 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. At Independent Appraisal, we are an authority in knowing the worth of real estate features in Hermosa Beach and Los Angeles County neighborhoods. This approach to value is usually given the most consideration when an appraisal is for a real estate sale.

Valuation Using the Income Approach

A third method of valuing a property is sometimes used when a neighborhood has a reasonable number of rental properties. In this scenario, the amount of income the property produces is taken into consideration along with income produced by comparable properties to give an indicator of the current value.

Coming Up With The Final Value

Combining information from all approaches, the appraiser is then ready to put down an estimated market value for the property in question. The estimate of value at the bottom of 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 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 employed as a guideline for lenders who don't want to loan a buyer more money than they could recover in the event they had to sell the property again. Here's what it all boils down to, an appraiser from Independent Appraisal will guarantee you discover the most accurate property value, so you can make profitable real estate decisions.