What's An Appraisal?
An appraisal is an opinion of value based on an analysis of similar properties located in the same market area, or neighborhood, like your home or property. Whether you are purchasing or refinancing, a home can be the most important investment you will make. It doesn't matter if it is a primary residence, an additional vacation property, or one of many rentals. Purchasing or refinancing real property is an involved financial transaction that requires multiple people working in concert to make it all happen. You may be familiar with the parties having a role in the transaction: the real estate agent and/or the loan officer. The loan officer with the bank provides the money required to finance the deal. And ensuring all requirements of the transaction are completed and that the title is clear to transfer to the buyer from the seller is the title company. We provide an unbiased estimate of what a buyer might expect to pay for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Kemper Capital Appraisals will ensure that you are informed.
The Inspection is Where Appraisal Begins
Our first task is to inspect the property to determine its current state. We physically inspect and photograph the interior and exterior of the property, noting the number of bedrooms and bathrooms, living areas, etc, to ensure they are liveable and habitable. The surrounding neighborhood and location of the property are noted as well. The building's exterior is measured to ensure it concurs with the tax records of the property. A sketch of the floor plan is made to illustrate the dimensions and layout of the dwelling. The appraiser looks for any obvious features - or defects - that would affect the value of the property. After the inspection, an appraiser uses two or three approaches to determine the value of the property: 1.) paired sales analysis, 2.) the cost approach, and, in the case of a rental property, 3.) the income approach.
The Cost Approach
Here, we gather information on local building costs, the cost of labor, and other factors to derive how much it would cost to replace the property from scratch. The cost approach may, or may not, be included in the report, depending on the lender's requirements.
Comparable Sales Approach
Appraisers are intimately familiar with the neighborhoods in which they appraise. They thoroughly understand the value of certain features to the residents of that area. Then, the appraiser researches recent sales in the neighborhood and finds properties that are 'comparable' to the subject at hand. 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 add or subtract from each comparable's sales price so that they are more accurately in line with the features of the subject property. For example, if the comparable property has a storm shelter and the subject does not, the appraiser may subtract a storm shelter's value from the comparable home's sales price. However, if the subject property has an extra half-bathroom and the comparable does not, the appraiser might add a certain amount to the comparable property. Once all necessary adjustments have been made, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At Kemper Capital Appraisals, we are experts in our knowledge of the neighborhoods in the San Francisco Bay Area and neighboring counties. This approach to value is commonly given the most importance when an appraisal is for a home exchange.
Income Approach
A third way of valuing properties is called the income approach. This approach is applied when the subject property is a rental property and the owner collects monthly rental income from it. In this approach the amount of income the property yields is factored in with income produced by other rental properties to determine the current value.
Arriving at an Opinion of Value
Analyzing the data 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 strongest indication of what a house is worth, it may 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 often employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth.
At the end of the day, an appraiser from Kemper Capital Appraisals will assure you attain the most accurate property value, so you can make the most informed real estate decisions.