Home Appraisals: A PrimerAcquiring real estate can be the most important investment most will ever make. Whether it's a primary residence, a seasonal vacation property or a rental fixer upper, the purchase of real property is a complex financial transaction that requires multiple parties to make it all happen. Practically all the parties participating are very familiar. The real estate agent is the most recognizable person in the exchange. Next, the bank provides the money required to finance the transaction. And the title company makes sure that all requirements of the exchange are completed and that the title is clear to transfer from the seller to the purchaser. So, what party makes sure the value of the real estate is consistent with the amount being paid? In comes the appraiser. We provide an unbiased opinion 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 J. P. Cubas Appraisal Services will ensure, you as an interested party, are informed. Appraisals start with the property inspectionTo determine an accurate status of the property, it's our responsibility to first conduct a thorough inspection. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really exist and are in the condition a reasonable person would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is accurate and conveying the layout of the property. Most importantly, the appraiser looks for any obvious amenities - or defects - that would affect the value of the house. Following the inspection, an appraiser uses two or three approaches to determining the value of the property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent. Replacement CostThis is where we analyze information on local construction costs, labor rates and other factors to determine how much it would cost to replace the property being appraised. This value often sets the upper limit on what a property would sell for. The cost approach is also the least used method. Analyzing Comparable SalesAppraisers can tell you a lot about the neighborhoods in which they work. They thoroughly understand the value of specific features to the people of that area. Then, the appraiser looks up recent transactions in the area and finds properties which are 'comparable' to the real estate at hand. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject.
A valid 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 J. P. Cubas Appraisal Services, we are experts when it comes to knowing the worth of particular items in NEWHALL and Los Angeles County neighborhoods. The sales comparison approach to value is commonly given the most weight when an appraisal is for a home exchange. Valuation Using the Income ApproachIn the case of income producing properties - rental houses for example - we may use a third approach to value. In this scenario, the amount of revenue the property generates is taken into consideration along with income produced by nearby properties to determine the current value. Arriving at a Value ConclusionCombining information from all applicable approaches, the appraiser is then ready to document an estimated market value for the property at hand. It is important to note that while this amount is probably the most reliable indication of what a property is worth, it probably will not be the final sales price. There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust an offer or listing price 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 the property is actually worth. The bottom line is, an appraiser from J. P. Cubas Appraisal Services will guarantee you attain the most accurate property value, so you can make the most informed real estate decisions. |