When you buy a property and go to the lender to finance your purchase. One of the first things any lender wants to know is whether the property you are buying is worth the money you borrow to pay for it. Typically, lenders want to make sure the property is worth more than the money you borrow.
The reason is that there is high liquidity risk in long-term loans and property assets. The lender needs to make sure even you default the loan in the down market or even something bad happens. It has something that is valuable enough to sell and earn a return on investment.
To access the value of the property, the lender will be responsible for picking the objective appraiser. It is imperative to approach a certified los angeles ca property appraiser to ensure the maximum value of the property. As the value of the property subject to the current market situation and the expectations of future earnings, the value of the most recent appraisal will be used to underwrite the loan.
There are 3 common approaches used when making an assessment:
Comparison of sales: sales comparison approach is the most common form of assessment for all types of property. It is simple and easy. The property will be compared with similar, recently sold properties in the same location. Appraisers then to adjust its estimates by accounting for differences between comparable properties and shrinkage.
Income approach: This method is used for income-producing properties, such as office buildings, shopping centers, apartments and so on. The assessor collects data from the subject property leases and the estimated value of the property in accordance with various assumptions.
Cost approach: This method is commonly used to estimate the value of the unique properties or properties in an area where some of the comparisons available. Assessor assumes an identical building will be constructed and estimated construction costs. As fees are based on the current market price of materials and labor costs, depreciation costs will be reduced to reflect the intrinsic value of the property.