Acquiring real estate can be the largest investment many of us might ever consider. Whether it's a primary residence, a seasonal vacation home or an investment, the purchase of real property is a detailed transaction that requires multiple parties to see it through.
Most people are familiar with the parties taking part in the transaction. The real estate agent is the most familiar face in the exchange. Then, the mortgage company provides the money necessary to finance the exchange. And ensuring all requirements of the transaction are completed and that the title is clear to pass to the buyer from the seller is the title company.
So, who's responsible for making sure the real estate is worth the amount being paid? This is where you meet the appraiser. We provide an unbiased estimate of what a buyer might 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 Appraisal Network, Corp. will ensure, you as an interested party, are informed.
Appraisals begin with the home inspection
To determine the true status of the property, it's our duty to first conduct a thorough inspection. We must actually see features, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they truly are there and are in the condition 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 affect the value of the property.
Back at the office, 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.
This is where the appraiser uses information on local construction costs, labor rates and other factors to ascertain how much it would cost to build a property similar to the one being appraised. This value often sets the maximum on what a property would sell for. The cost approach is also the least used method.
Analyzing Comparable Sales
Appraisers are intimately familiar with the communities in which they appraise. They innately understand the value of certain features to the people of that area. Then, the appraiser looks up recent transactions in the vicinity and finds properties which are 'comparable' to the home being appraised. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, extra bathrooms or bedrooms, or quality of construction, we adjust the comparable properties so that they more accurately portray 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 Appraisal Network, Corp., we are an authority when it comes to knowing the value of particular items in Westbury and Nassau County neighborhoods. This approach to value is usually given the most weight when an appraisal is for a home purchase.
Valuation Using the Income Approach
A third way of valuing a house is sometimes employed when an area has a reasonable number of rental properties. In this case, the amount of revenue the real estate generates is taken into consideration along with other rents in the area for comparable properties to derive the current value.
Putting It All Together
Combining information from all approaches, the appraiser is then ready to put down an estimated market value for the subject property. It is important to note that while the appraised value is probably the best indication of what a house is worth, it may not be the price at which the property closes. 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. Regardless, the appraised value is often used as a guideline for lenders who don't want to loan a buyer more money than they could get back in case they had to put the property on the market again. At the end of the day, an appraiser from Appraisal Network, Corp. will help you get the most fair and balanced property value, so you can make the most informed real estate decisions.