What Goes Into an Appraisal?
Purchasing a home can be the most important investment most of us may ever encounter. Whether it's where you raise your family, a second vacation property or an investment, purchasing real property is an involved financial transaction that requires multiple people working in concert to make it all happen.
Most people are familiar with the parties taking part in the transaction. The most recognizable entity in the exchange is the real estate agent. Next, the lender provides the financial capital required to bankroll the exchange. The title company ensures that all requirements of the exchange are completed and that a clear title transfers to the buyer from the seller.
So, who makes sure the property is worth the amount being paid? This is where you meet the appraiser. We provide an unbiased estimate of what a buyer could expect to pay — or a seller receive — for a property, 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
To ascertain an accurate status of the property, it's our responsibility to first perform a thorough inspection. We must see features hands on, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they truly exist 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 accurate and conveying the layout of the property. Most importantly, we identify any obvious features - or defects - that would have an impact on the value of the property.
Back at the office, an appraiser uses 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 gather information on local building costs, the cost of labor and other elements to derive how much it would cost to construct a property comparable to the one being appraised. This estimate usually sets the upper limit on what a property would sell for. The cost approach is also the least used method.
Paired Sales Analysis
Appraisers get to know the subdivisions in which they appraise. They innately understand the value of specific features to the residents of that area. Then, the appraiser researches recent sales in the neighborhood and finds properties which are 'comparable' to the subject being appraised. By assigning a dollar value to certain items such as upgraded appliances, additional bathrooms, additional living area, quality of construction, lot size, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject.
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 The Welter Appraisal Group, we are an authority in knowing the worth of particular items in Oakhurst and Monmouth County neighborhoods. This approach to value is typically awarded the most consideration when an appraisal is for a home exchange.
Valuation Using the Income Approach
A third way of valuing a house is sometimes applied when a neighborhood has a measurable number of renter occupied properties. In this scenario, the amount of revenue the real estate generates is taken into consideration along with income produced by neighboring properties to determine the current value.
The Bottom Line
Combining information from all applicable approaches, the appraiser is then ready to state an estimated market value for the property at hand. The estimate of value at the bottom of the appraisal report is not necessarily the final sales price even though it is likely the best indication of a property's valuePrices can always be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. 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 sell the property again. It all comes down to this, an appraiser from The Welter Appraisal Group will guarantee you discover the most accurate property value, so you can make wise real estate decisions.