Real Property Appraisals: A PrimerOne's home purchase can be the most serious financial decision some of us could ever consider. Whether it's a main residence, an additional vacation home or one of many rentals, purchasing real property is an involved transaction that requires multiple parties to see it through.
It's likely you are familiar with the parties taking part in the transaction. The most known face in the exchange is the real estate agent. Next, the lender provides the financial capital necessary to finance the exchange. Ensuring all aspects of the transaction are completed and that the title is clear to transfer from the seller to the purchaser is the title company.
So what party is responsible for making sure the property is consistent with the amount being paid? This is where the appraiser comes in. 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 professional North Carolina licensed appraiser from Davidson & Associates will ensure you as an interested party are informed.
The inspection is where an appraisal beginsTo ascertain the true status of the property, it's our duty to first perform a thorough inspection. We must actually view features, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed exist and are in the shape a typical person would expect them to be. To make sure the stated square footage is accurate and convey the layout of the house, the inspection often requires creating a sketch of the floor plan. Most importantly, we identify any obvious features - or defects - that would affect the value of the property.
Following the inspection, we use two or three approaches when determining the value of the property: paired sales analysis and, in the case of a rental property, an income approach.
Replacement CostHere, the appraiser analyzes information on local building costs, the cost of labor and other factors to figure out how much it would cost to replace the property being appraised. This value often sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.
Paired Sales AnalysisAppraisers become very familiar with the neighborhoods in which they appraise. We thoroughly understand the value of certain features to the homeowners of that area. Then, the appraiser researches recent transactions in close proximity to the subject and finds properties which are 'comparable' to the property in question. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject.
Valuation Using the Income ApproachA third way of valuing real estate is sometimes employed when a neighborhood has a reasonable number of rental properties. 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 determine the current value.
Coming Up With the Final ValueCombining information from all applicable approaches, the appraiser is then ready to state an estimated market value for the subject property. Note: While this amount is probably the most accurate indication of what a house would sell for in an open market, it probably will not be the final sales price. 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'. But the appraised value is typically used as a guideline for lenders who don't want to loan a buyer more money than the property would likely sell for in an open marketplace. The bottom line is: An appraiser from Davidson & Associates will help you attain the most fair and balanced property value, so you can make the most informed real estate decisions.