A Description of the Appraisal Process

Purchasing a house is the most important financial decision many of us may ever encounter. Whether it's where you raise your family, an additional vacation property or one of many rentals, the purchase of real property is a complex transaction that requires multiple parties to pull it all off.

It's likely you are familiar with the parties taking part in the transaction. The most known person in the exchange is the real estate agent. Next, the mortgage company provides the financial capital needed to fund the transaction. And ensuring all areas of the exchange are completed and that the title is clear to pass to the buyer from the seller is the title company.

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So, what party makes sure the value of the property is consistent with the amount being paid? 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 Appraisal Quest Co. (805) 469-3088 will ensure, you as an interested party, are informed.

Appraisals begin with the property inspection

Our first task at Appraisal Quest Co. (805) 469-3088 is to inspect the property to ascertain its true status. We must physically see features, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really 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 convey the layout of the property, the inspection often requires creating a sketch of the floorplan. Most importantly, the appraiser looks for any obvious features - or defects - that would affect the value of the property.

Back at the office, an appraiser uses 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

This is where we gather information on local building costs, the cost of labor and other elements to figure out how much it would cost to build a property nearly identical 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.

Sales Comparison

Appraisers are intimately familiar with the communities in which they appraise. They thoroughly understand the value of specific features to the people of that area. Then, the appraiser looks up recent sales in close proximity to the subject and finds properties which are 'comparable' to the property being appraised. By assigning a dollar value to certain items such as upgraded appliances, additional bathrooms, additional living area, quality of construction, lot size, we adjust the comparable properties so that they more accurately portray the features of subject property.

  • Say, for example, the comparable has a fireplace and the subject does not, the appraiser may subtract the value of a fireplace from the sales price of the comparable.
  • If the subject property has an extra half-bathroom and the comparable does not, the appraiser might add an 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 Appraisal Quest Co. (805) 469-3088, we are experts in knowing the value of real estate features in Ventura and Ventura County neighborhoods. The sales comparison approach to value is typically awarded the most consideration when an appraisal is for a real estate purchase.

Valuation Using the Income Approach

A third method 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 property produces is factored in with income produced by neighboring properties to determine the current value.

Reconciliation

Examining the data from all applicable approaches, the appraiser is then ready to put down an estimated market value for the property at hand. Note: While this amount is probably the best indication of what a property is worth, it may not be the final sales price. 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. Regardless, the appraised value is often used as a guideline for lenders who don't want to loan a buyer more money than they could recover in case they had to sell the property again. Here's what it all boils down to, an appraiser from Appraisal Quest Co. (805) 469-3088 will guarantee you get the most accurate property value, so you can make profitable real estate decisions.