What goes into an appraisal?A home purchase is the largest transaction some of us may ever consider. It doesn't matter if it's where you raise your family, a second vacation property or an investment, the purchase of real property is a complex transaction that requires multiple parties to pull it all off.
Practically all the participants are very familiar. The real estate agent is the most recognizable face in the transaction. Next, the lender provides the money required to finance the deal. Ensuring all requirements of the exchange are completed and that the title is clear to transfer to the buyer from the seller is the title company.
So who's responsible for making sure the value of the real estate is consistent with the amount being paid? 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 professional North Carolina licensed appraiser from Gilpatrick Appraisal will ensure you as an interested party are informed.
Appraisals start with the property inspectionTo ascertain an accurate status of the property, it's our duty to first perform a thorough inspection. We must actually see features, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they truly are there and are in the condition a reasonable person would expect them to be. To ensure the stated size of the property is accurate and illustrate the layout of the property, the inspection often includes creating a sketch of the floor plan. Most importantly, the appraiser identifies any obvious features - or defects - that would have an impact on the value of the house.
After the inspection, we use two or three approaches when determining the value of real property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.
Replacement CostThis is where we pull information on local building costs, labor rates and other elements to determine how much it would cost to replace the property being appraised. This figure commonly sets the maximum on what a property would sell for. It's also the least used predictor of value.
Paired Sales AnalysisAppraisers are intimately familiar with the neighborhoods in which they appraise. We thoroughly understand the value of particular 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 subject being appraised. By assigning a dollar value to certain items such as upgraded appliances, extra bathrooms, an additional living area, quality of construction, lot size, we adjust the comparable properties so that they are more accurately in line with the features of subject.
Valuation Using the Income ApproachIn the case of income producing properties - rental houses for example - we may use an additional approach to value. In this case, the amount of revenue the property generates is taken into consideration along with other rents in the area for comparable properties to determine the current value.
ReconciliationCombining information from all approaches, the appraiser is then ready to state an estimated market value for the subject property. The estimate of value on the appraisal report is not always the final sales price even though it is likely the best indication of a property's market value 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'. Regardless, 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. It all comes down to this: An appraiser from Gilpatrick Appraisal will help you attain the most fair and balanced property value, so you can make profitable real estate decisions.