What Is an Appraisal?
A home purchase is the biggest financial decision some people could ever consider. It doesn't matter if a main residence, an additional vacation property or a rental fixer upper, the purchase of real property is a complex financial transaction that requires multiple people working in concert to make it all happen.
Most people are familiar with the parties taking part in the transaction. The real estate agent is the most known entity in the transaction. Next, the lender provides the money needed to fund the exchange. And ensuring all requirements of the sale are completed and that a clear title passes from the seller to the buyer is the title company.
So, what party makes sure the property is worth the purchase price? This is where the appraiser comes in. 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 starts
To ascertain the true status of the property, it's our responsibility to first complete a thorough inspection. We must see features hands on, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they truly exist and are in the condition a reasonable buyer would expect them to be. To ensure the stated square footage has not been misrepresented 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 property.
Next, after the inspection, an appraiser uses two or three approaches to determining the value of the property: paired sales analysis and, in the case of a rental property, an income approach.
Here, the appraiser analyzes information on local building costs, labor rates and other elements to figure out how much it would cost to build a property comparable to the one being appraised. This estimate often sets the upper limit on what a property would sell for. The cost approach is also the least used method.
Appraisers become very familiar with the subdivisions in which they work. They thoroughly understand the value of certain features to the homeowners 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. By assigning a dollar value to certain items such as fireplaces, room layout, appliance upgrades, extra bathrooms or bedrooms, or quality of construction, we add or subtract from each comparable's sales price so that they more accurately match the features of subject property.
After all differences have been accounted for, 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 in knowing the value of real estate features in Manahawkin and Ocean County neighborhoods. This approach to value is most often given the most consideration when an appraisal is for a home sale.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - we may use an additional method of valuing a house. In this case, the amount of income the property generates is taken into consideration along with income produced by similar properties to derive the current value.
Arriving at a Value Conclusion
Combining information from all applicable approaches, the appraiser is then ready to put down an estimated market value for the subject property. The estimate of value at the bottom of the appraisal report is not necessarily the final sales price even though it is likely the best indication of a property's valueIt'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 often employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. It all comes down to this, an appraiser from TNC Appraisal Service, Inc. will guarantee you get the most accurate property value, so you can make the most informed real estate decisions.