A Description of the Appraisal Process
Their home's purchase is the most important transaction many of us could ever make. Whether it's where you raise your family, a second vacation property or a rental fixer upper, the purchase of real property is a complex transaction that requires multiple parties to make it all happen.
It's likely you are familiar with the parties taking part in the transaction. The most known face in the exchange is the real estate agent. Next, the bank provides the financial capital necessary to finance the exchange. The title company ensures that all details of the exchange are completed and that a clear title transfers from the seller to the purchaser.
So, what party is responsible for making sure the property is worth the purchase price? This is where you meet the appraiser. We provide an unbiased estimate 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 The Welter Appraisal Group will ensure, you as an interested party, are informed.
Inspecting the subject property
Our first responsibility at The Welter Appraisal Group is to inspect the property to ascertain its true status. We must actually view aspects of the property, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed are there and are in the condition a typical buyer would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is correct and illustrating the layout of the property. Most importantly, we identify any obvious features - or defects - that would have an impact on the value of the house.
Following the inspection, an appraiser uses two or three approaches to determining the value of real property: sales comparison and, in the case of a rental property, an income approach.
Here, the appraiser gathers information on local building costs, the cost of labor and other elements to ascertain how much it would cost to replace the property being appraised. This estimate commonly sets the upper limit on what a property would sell for. It's also the least used predictor of value.
Appraisers become very familiar with the communities in which they work. They innately understand the value of certain features to the people of that area. Then, the appraiser researches recent transactions in close proximity to the subject and finds properties which are 'comparable' to the home in question. By assigning a dollar value to certain items such as upgraded appliances, additional bathrooms, additional living area, quality of construction, lot size, we adjust the comparable properties so that they are more accurately in line with the features of subject property.
An opinion of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. At The Welter Appraisal Group, we are an authority when it comes to knowing the value of real estate features in Oakhurst and Monmouth County neighborhoods. The sales comparison approach to value is typically given the most weight when an appraisal is for a real estate purchase.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - we may use an additional way of valuing real estate. In this scenario, the amount of revenue the real estate produces is taken into consideration along with income produced by similar properties to determine the current value.
Combining information from all approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. Note: While the appraised value is probably the strongest indication of what a house is worth, it probably will not be the final sales price. There are always mitigating factors such as the seller's desire to get out of the property, 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 they could recover in case they had to put the property on the market again. The bottom line is, an appraiser from The Welter Appraisal Group will guarantee you get the most accurate property value, so you can make profitable real estate decisions.