Comprehending Appraisals

Purchasing a home is the most important financial decision some could ever consider. Whether it's where you raise your family, a second vacation property or one of many rentals, purchasing real property is an involved financial transaction that requires multiple parties to pull it all off.

Practically all the participants are quite familiar. The most familiar person in the transaction is the real estate agent. Next, the bank provides the money necessary to finance the exchange. The title company ensures that all requirements of the transaction are completed and that the title is clear to transfer to the buyer from the seller.

To learn more about appraising, click here to see a short video or call us today to talk about your specific property.

So, what party makes sure the property is worth the amount being paid? 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.

The inspection is where an appraisal begins

Our first duty at TNC Appraisal Service, Inc is to inspect the property to ascertain its true status. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they truly are there and are in the shape a typical buyer would expect them to be. To make sure the stated size of the property is accurate and document the layout of the home, the inspection often includes creating a sketch of the floorplan. Most importantly, the appraiser looks for any obvious features - or defects - that would have an impact on the value of the house.

Back at the office, we use 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.

Replacement Cost

Here, the appraiser analyzes information on local building costs, the cost of labor and other factors to calculate how much it would cost to construct a property comparable to the one being appraised. This value usually sets the upper limit on what a property would sell for. It's also the least used method.

Analyzing Comparable Sales

Appraisers get to know the neighborhoods in which they appraise. They thoroughly understand the value of specific features to the people of that area. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are 'comparable' to the subject being appraised. Using knowledge of the value of certain items such as square footage, extra bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we adjust the comparable properties so that they more accurately portray the features of subject.

  • If, for example, the comparable property has an extra half bath that the subject does not, the appraiser may subtract the value of that half bath from the sales price of the comparable.
  • In the case where the subject has something such as an extra half bath that a comparable doesn't have, the appraiser might add the value of that bath to the comparable 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. When it comes to associating a value with features of homes in Barnegat and Ocean, TNC Appraisal Service, Inc is second to none. The sales comparison approach to value is usually given the most consideration when an appraisal is for a home purchase.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - we may use a third method of valuing a property. In this scenario, the amount of income the property produces is taken into consideration along with other rents in the area for comparable properties to derive the current value.

Putting It All Together

Examining the data from all applicable approaches, the appraiser is then ready to state an estimated market value for the subject property. The estimate of value on the appraisal report is not always what's being paid for the property even though it is likely the best indication of what a property is worth. Depending on the specific circumstances of the buyer or seller, their level of urgency or a buyer's desire for that exact property, the closing price of a home can always be driven up or down.But the appraised value is often used 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. The bottom line is, an appraiser from TNC Appraisal Service, Inc will help you discover the most fair and balanced property value, so you can make the most informed real estate decisions.