What Are the Parts of an Appraisal?
Buying a house can be the most serious investment many might ever encounter. It doesn't matter if a main residence, an additional vacation home or one of many rentals, purchasing real property is an involved financial transaction that requires multiple people working in concert to pull it all off.
Most people are familiar with the parties having a role in the transaction. The most familiar person in the transaction is the real estate agent. Then, the lender provides the financial capital needed to fund the exchange. And ensuring all areas of the sale are completed and that a clear title passes from the seller to the buyer is the title company.
So, what party is responsible for making sure the value of the real estate is consistent 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 Stern & Dragoset Appraisal Group will ensure, you as an interested party, are informed.
The inspection is where an appraisal begins
Our first duty at Stern & Dragoset Appraisal Group is to inspect the property to ascertain its true status. We must see features first hand, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they indeed exist and are in the condition a reasonable person would expect them to be. The inspection often includes a sketch of the property, 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 property.
Following the inspection, 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, we gather information on local construction costs, the cost of labor and other elements to calculate how much it would cost to construct a property comparable to the one being appraised. This estimate usually sets the maximum on what a property would sell for. The cost approach is also the least used method.
Paired Sales Analysis
Appraisers become very familiar with the neighborhoods in which they appraise. They innately understand the value of specific features to the residents 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 at hand. By assigning a dollar value to certain items such as square footage, extra bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject property.
An opinion of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. When it comes to valuing features of homes in Woodbridge and Middlesex, Stern & Dragoset Appraisal Group can't be beat. This approach to value is typically awarded the most importance when an appraisal is for a real estate purchase.
Valuation Using the Income Approach
A third way of valuing a property is sometimes used when a neighborhood has a measurable number of renter occupied properties. In this case, the amount of income the property produces is taken into consideration along with income produced by comparable properties to give an indicator of the current value.
Combining information from all approaches, the appraiser is then ready to state an estimated market value for the subject property. It is important to note that while the appraised value is probably the most reliable indication of what a property is worth, it may 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 the final price up or down. But the appraised value is often employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. Here's what it all boils down to, an appraiser from Stern & Dragoset Appraisal Group will guarantee you attain the most accurate property value, so you can make profitable real estate decisions.