Understanding the Appraisal Process

Their home's purchase can be the most significant transaction some people might ever make. Whether it's where you raise your family, an additional vacation home or an investment, the purchase of real property is a detailed financial transaction that requires multiple people working in concert to see it through.

The majority of the parties participating are very familiar. The real estate agent is the most familiar entity in the exchange. Next, the lender provides the financial capital necessary to bankroll the exchange. The title company makes sure that all areas of the transaction are completed and that the title is clear to pass to the buyer from the seller.

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So, what party is responsible for making sure the value of the real estate is in line with the amount being paid? In comes the appraiser. We provide an unbiased estimate of what a buyer could expect to pay — or a seller receive — for a parcel of real estate, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Anna Casale (201) 709-8612 will ensure, you as an interested party, are informed.

The inspection is where an appraisal begins

To determine the true status of the property, it's our duty to first perform a thorough inspection. We must physically see features, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really exist 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, the appraiser identifies any obvious features - or defects - that would affect the value of the house.

Once the site has been inspected, an appraiser uses two or three approaches to determining the value of the property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.

Cost Approach

Here, the appraiser gathers information on local building costs, the cost of labor and other factors to figure out how much it would cost to build a property nearly identical to the one being appraised. This value usually sets the maximum on what a property would sell for. It's 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 specific 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 upgraded appliances, additional bathrooms, additional living area, quality of construction, lot size, we add or subtract from each comparable's sales price so that they more accurately portray the features of subject.

  • Say, for example, the comparable property has a fireplace and the subject does not, the appraiser may subtract the value of a fireplace from the sales price of the comparable home.
  • But, 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.

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 associating a value with features of homes in Hillsdale and Bergen, Anna Casale (201) 709-8612 can't be beat. The sales comparison approach to value is typically given the most weight when an appraisal is for a real estate exchange.

Valuation Using the Income Approach

A third method of valuing a house is sometimes applied when an area has a reasonable number of rental properties. In this situation, the amount of revenue the real estate yields is factored in with income produced by similar properties to determine the current value.

Arriving at a Value Conclusion

Examining the data from all applicable approaches, the appraiser is then ready to put down an estimated market value for the subject property. It is important to note that while this amount is probably the most accurate 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 an offer or listing price up or down. 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 is actually worth. At the end of the day, an appraiser from Anna Casale (201) 709-8612 will help you discover the most accurate property value, so you can make wise real estate decisions.