Understanding Appraisals

Their home's purchase is the largest investment most will ever consider. 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 pull it all off.

The majority of the parties involved are quite familiar. The most known entity in the exchange is the real estate agent. Then, the bank provides the financial capital necessary to finance the deal. The title company makes sure that all requirements of the exchange are completed and that a clear title transfers from the seller to the buyer.

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So, who's responsible for making sure the value of the real estate is consistent with the amount being paid? This is where you meet the appraiser. We provide an unbiased estimate of what a buyer might expect to pay — or a seller receive — for a parcel of real estate, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Rachel Lyntton (909) 730-0612 will ensure, you as an interested party, are informed.

Appraisals begin with the property inspection

Our first responsibility at Rachel Lyntton (909) 730-0612 is to inspect the property to determine its true status. We must physically view features, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly exist and are in the condition a reasonable buyer would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is accurate and illustrating the layout of the property. Most importantly, the appraiser looks for any obvious features - or defects - that would affect the value of the property.

Following the inspection, we use two or three approaches to determining the value of real property: sales comparison and, in the case of a rental property, an income approach.

Cost Approach

Here, we analyze information on local building costs, the cost of labor and other factors to derive how much it would cost to construct a property comparable to the one being appraised. This value often sets the upper limit on what a property would sell for. It's also the least used predictor of value.

Paired Sales Analysis

Appraisers can tell you a lot about the subdivisions in which they appraise. They innately understand the value of specific features to the people of that area. Then, the appraiser researches recent sales in the neighborhood and finds properties which are 'comparable' to the home being appraised. By assigning a dollar value to certain items such as square footage, extra bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we adjust the comparable properties so that they are more accurately in line with the features of subject.

For example, if the comparable has an irrigation system and the subject does not, the appraiser may subtract the value of an irrigation system from the sales price of the comparable.
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.

A true estimate of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. At Rachel Lyntton (909) 730-0612, we are experts when it comes to knowing the value of particular items in Pomona and Los Angeles County neighborhoods. This approach to value is usually awarded the most consideration when an appraisal is for a home exchange.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - we may use a third way of valuing a property. In this scenario, the amount of revenue the property produces is taken into consideration along with other rents in the area for comparable properties to derive the current value.

Reconciliation

Combining information from all approaches, the appraiser is then ready to put down an estimated market value for the property in question. Note: While the appraised value is probably the best indication of what a property is worth, it may not be the final sales price. Depending on the specific 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 they could get back in the event they had to sell the property again. It all comes down to this, an appraiser from Rachel Lyntton (909) 730-0612 will guarantee you get the most accurate property value, so you can make profitable real estate decisions.