A Description of the Appraisal Process
A home purchase is the biggest transaction many of us will ever encounter. Whether it's where you raise your family, a seasonal vacation home or one of many rentals, purchasing real property is a complex transaction that requires multiple parties to make it all happen.
Practically all the participants are quite familiar. The most known face in the transaction is the real estate agent. Then, the lender provides the financial capital needed to bankroll the deal. And the title company makes sure that all aspects of the exchange are completed and that the title is clear to transfer to the buyer from the seller.
So, who's responsible for making sure the value of the property is in line with the purchase price? In comes the appraiser. 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 TNC Appraisal Service, Inc. will ensure, you as an interested party, are informed.
Inspecting the subject property
Our first responsibility at TNC Appraisal Service, Inc. is to inspect the property to ascertain its true status. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they really exist and are in the shape a typical person would expect them to be. To ensure the stated size of the property has not been misrepresented and convey the layout of the home, the inspection often requires creating a sketch of the floorplan. Most importantly, we look for any obvious features - or defects - that would affect the value of the property.
Back at the office, an appraiser uses two or three approaches to determining the value of real property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.
Here, the appraiser uses 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 value usually sets the maximum on what a property would sell for. The cost approach is also the least used method.
Paired Sales Analysis
Appraisers are intimately familiar with the communities in which they appraise. They innately understand the value of particular features to the homeowners of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the real estate being appraised. Using knowledge of the value of certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or extra storage space, we add or subtract from each comparable's sales price so that they more accurately portray the features of subject.
In the end, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At TNC Appraisal Service, Inc., we are experts when it comes to knowing the value of real estate features in Manahawkin and Ocean County neighborhoods. The sales comparison approach to value is typically awarded the most consideration when an appraisal is for a real estate sale.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - the appraiser may use a third way of valuing real estate. In this situation, the amount of income the real estate produces is factored in with other rents in the area for comparable properties to determine the current value.
Arriving at a Value Conclusion
Analyzing the data from all approaches, the appraiser is then ready to document an estimated market value for the subject property. Note: While the appraised value is probably the most accurate indication of what a house is worth, it probably will not be the final sales price. There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust an offer or listing price up or down. But the appraised value is typically employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. The bottom line is, an appraiser from TNC Appraisal Service, Inc. will guarantee you discover the most fair and balanced property value, so you can make profitable real estate decisions.