A Description of the Appraisal Process
Buying a home can be the most significant investment some people could ever encounter. Whether it's where you raise your family, an additional vacation property or an investment, purchasing real property is a detailed transaction that requires multiple parties to make it all happen.
You're probably familiar with the parties taking part in the transaction. The real estate agent is the most known entity in the transaction. Then, the bank provides the financial capital needed to fund the exchange. The title company makes sure that all requirements of the sale are completed and that the title is clear to pass from the seller to the buyer.
So, what party is responsible for making sure the real estate is worth the amount being paid? This is where the appraiser comes in. We provide an unbiased estimate 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 starts
To ascertain an accurate status of the property, it's our duty to first complete 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 present and are in the shape a reasonable person would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is proper and conveying the layout of the property. Most importantly, we look for any obvious amenities - or defects - that would have an impact on the value of the house.
After the inspection, an appraiser uses two or three approaches to determining the value of the property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.
Here, we pull information on local construction costs, the cost of labor and other elements to derive 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 method.
Paired Sales Analysis
Appraisers can tell you a lot about the subdivisions in which they appraise. They innately understand the value of particular features to the people of that area. Then, the appraiser researches recent sales in the vicinity and finds properties which are 'comparable' to the subject being appraised. Using knowledge of the value of 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.
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 TNC Appraisal Service, Inc., we are experts when it comes to knowing the worth of real estate features in Manahawkin and Ocean County neighborhoods. This approach to value is usually given the most importance 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 a house. In this scenario, the amount of revenue the property produces is factored in with other rents in the area for comparable properties to give an indicator of the current value.
Coming Up With The Final Value
Examining the data from all approaches, the appraiser is then ready to state an estimated market value for the property at hand. Note: While this amount is probably the strongest indication of what a house is worth, it may not be the price at which the property closes. It's not uncommon for prices to be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. Regardless, the appraised value is typically used 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 TNC Appraisal Service, Inc. will help you attain the most accurate property value, so you can make wise real estate decisions.