The Appraisal Process

What goes into an appraisal?

One's home purchase is the most significant transaction some of us may ever consider. It doesn't matter if it's where you raise your family, a seasonal vacation home or one of many rentals, the purchase of real property is a detailed transaction that requires multiple parties to make it all happen.

It's likely you are familiar with the parties having a role in the transaction. The most known entity in the exchange is the real estate agent. Then, the lender provides the money required to fund the transaction. The title company sees to it that all aspects of the exchange are completed and that a clear title transfers to the buyer from the seller.

So what party makes sure the real estate is consistent with the amount being paid? In comes 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 professional licensed appraiser from Priority Appraisal will ensure you as an interested party are informed.

The inspection is where an appraisal starts. Our first duty at Priority Appraisal is to inspect the property to determine its true status. We must physically see aspects of the property, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed are present and are in the shape a typical buyer would expect them to be. To make sure the stated square footage is accurate and illustrate the layout of the home, the inspection often entails creating a sketch of the floor plan. Most importantly, we identify any obvious features - or defects - that would have an impact on the value of the property.

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

Paired Sales Analysis. Appraisers are intimately familiar with the communities in which they work. We innately understand the value of specific features to the people of that area. Then, the appraiser looks up recent sales in the vicinity and finds properties which are 'comparable' to the property being appraised. By assigning a dollar value to certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or extra storage space, we add or subtract from each comparable's sales price so that they more accurately portray the features of subject. If, for example, 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. However, if the subject has an extra half-bathroom and the comparable does not, the appraiser might add an amount to the comparable property. At Priority Appraisal, we are an authority when it comes to knowing the value of particular items in both the Phoenix and Sacramento County neighborhoods. The sales comparison approach to value is typically awarded the most consideration when an appraisal is for a home sale.

Replacement Cost. This is where we use information on local building costs, the cost of labor and other factors to figure out how much it would cost to replace the property being appraised. This figure often sets the upper limit on what a property would sell for. It's also the least used method.

Valuation Using the Income Approach. In the case of income producing properties - rental houses for example - the appraiser may use an additional approach to value. In this scenario, the amount of income the real estate yields is taken into consideration along with income produced by similar properties to determine the current value.

Putting It All Together. Examining the data from all applicable approaches, the appraiser is then ready to state an estimated market value for the property at hand. Note: While the appraised value is probably the strongest indication of what a house would sell for in an open market, it probably will not be the price at which the property closes. There are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust the final price up or down. But the appraised value is often employed as a guideline for lenders who don't want to loan a buyer more money than the property would likely sell for in an open marketplace. At the end of the day: An appraiser from Priority Appraisal will guarantee you discover the most fair and balanced property value, so you can make profitable real estate decisions.

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