What Are the Parts of an Appraisal?
Purchasing a house can be the biggest transaction some people will ever consider. Whether it's a primary residence, an additional vacation home or a rental fixer upper, purchasing real property is a detailed transaction that requires multiple parties to see it through.
Most of the participants are very familiar. The real estate agent is the most known person in the exchange. Then, the bank provides the money required to bankroll the deal. And ensuring all details of the transaction are completed and that a clear title transfers from the seller to the purchaser is the title company.
So, what party is responsible for making sure the property is worth the purchase price? This is where the appraiser comes in. We provide an unbiased opinion of what a buyer might expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Accurate Appraisals of North Carolina will ensure, you as an interested party, are informed.
The inspection is where an appraisal starts
To determine an accurate status of the property, it's our duty to first perform a thorough inspection. We must physically see features, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed are there and are in the shape a reasonable person would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is proper and conveying the layout of the property. Most importantly, we identify any obvious amenities - or defects - that would have an impact on the value of the property.
Once the site has been inspected, we use two or three approaches to determining the value of real property: paired sales analysis and, in the case of a rental property, an income approach.
Here, we pull information on local building costs, labor rates and other factors to ascertain how much it would cost to replace the property being appraised. This estimate commonly sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.
Appraisers become very familiar with the subdivisions in which they work. They thoroughly understand the value of particular features to the homeowners of that area. Then, the appraiser researches recent transactions in close proximity to the subject and finds properties which are 'comparable' to the real estate at hand. By assigning a dollar value to certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or additional storage space, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject 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 Accurate Appraisals of North Carolina, we are experts in knowing the value of particular items in Hampstead and Pender County neighborhoods. The sales comparison approach to value is usually awarded the most consideration when an appraisal is for a real estate exchange.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - we may use a third approach to value. In this case, the amount of revenue the property yields is factored in with other rents in the area for comparable properties to give an indicator of the current value.
The Bottom Line
Examining the data from all approaches, the appraiser is then ready to document an estimated market value for the subject property. It is important to note that while this amount is probably the most reliable indication of what a house is worth, it may not be the price at which the property closes. There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust the final 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 they could recover in the event they had to sell the property again. It all comes down to this, an appraiser from Accurate Appraisals of North Carolina will guarantee you attain the most fair and balanced property value, so you can make profitable real estate decisions.