When a homeowner and homebuyer sit down at the closing table to transfer real property, the title agent will confirm the monetary consideration of the transaction, part of which will be a purchase amount that both parties agreed upon. Since this is a market transaction, it may be tempting to think of the purchase price as the property value, but this may not always be the case.
In the real estate industry, properties may be valued according to various perspectives. There’s the assessed value, appraised value, market value, projected value, and adjusted value. These are all real economic measurements, but they serve different purposes. To understand what determines the value of home listings in Irvine, it is important to understand four key factors.
Comparable Sales and Market Value
When real estate agents take on a new property listing, they consult automated valuation models, which are sometimes referred to as “pencil appraisals” by mortgage professionals. These models are based on recent sales of comparable properties in a neighborhood or subdivision, and they produce what is known as the market value, which is what economists pay more attention to. Depending on the financial goals of sellers, market value serves as a baseline for setting the listing price.
Real property assessments are conducted by jurisdiction revenue collection offices to determine taxation schedules. The Orange County Assessor is responsible for this determination, which is based on the principle of land being an appreciating asset. This is useful when calculating the value of the home site minus the structure, but only if zoning is also taken into consideration.
When prospective buyers need mortgage financing to buy real estate in Irvine, the lending bank orders one or more appraisals on the subject property. Appraisers determine home values based on several factors aside from the listing price. They often arrive at the property and inspect the structure, its condition, improvement, and potential as well as the neighborhood. Mortgage lenders evaluate the appraiser’s report with a critical eye since they need to establish underwriting factors such as risk tolerance and the financial worth of granting a mortgage based on the property as collateral. Appraised values are recorded on databases that can be accessed by economists when they observe market conditions.
This maxim of the real estate industry is more complex than most people think. For example, Irvine has always been an ideal location by virtue of its status as a carefully planned city where quality of life is the main concern. However, this advantage could be eroded if the city suddenly starts experiencing frequent and destructive seismic activity. Location is all about future prospects of land and communities that provide high quality of life. A great location with a promising future based on solid past performance means real estate will be a great investment that should be priced accordingly.
If you’re looking for houses or condos for sale in Irvine, CA, make sure you connect with a trusted local real estate agent who can help you find the property you’re looking for. Call OC Residential today to schedule an appointment and begin the search for your dream home.