Understanding Appraisals

Their home's purchase can be the biggest investment most of us will ever make. It doesn't matter if where you raise your family, a seasonal vacation home or a rental fixer upper, the purchase of real property is a detailed transaction that requires multiple people working in concert to see it through.

Practically all the participants are very familiar. The real estate agent is the most known entity in the transaction. Next, the mortgage company provides the money necessary to finance the deal. The title company sees to it that all details of the sale are completed and that a clear title passes to the buyer from the seller.

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So, who makes sure the value of the property is consistent with the amount being paid? 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 parcel of real estate, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from The Welter Appraisal Group will ensure, you as an interested party, are informed.

The inspection is where an appraisal begins

To ascertain the true status of the property, it's our responsibility to first conduct a thorough inspection. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really are there and are in the condition a typical person would expect them to be. To ensure the stated size of the property has not been misrepresented and convey the layout of the home, the inspection often entails creating a sketch of the floorplan. Most importantly, we look for any obvious features - or defects - that would have an impact on the value of the property.

Following the inspection, we use two or three approaches to determining the value of the property: sales comparison and, in the case of a rental property, an income approach.

Replacement Cost

This is where we pull information on local building costs, labor rates and other factors to derive how much it would cost to replace the property being appraised. This estimate usually sets the maximum on what a property would sell for. The cost approach is also the least used method.

Paired Sales Analysis

Appraisers become very familiar with the neighborhoods in which they work. They innately understand the value of particular features to the people of that area. Then, the appraiser researches recent transactions in the neighborhood and finds properties which are 'comparable' to the home in question. Using knowledge of the value of certain items such as square footage, additional bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we adjust the comparable properties so that they are more accurately in line with the features of subject property.

  • For example, if the comparable has a storm shelter and the subject does not, the appraiser may deduct the value of a storm shelter from the sales price of the comparable home.
  • However, if the subject has an extra half-bathroom and the comparable does not, the appraiser might add an amount to the comparable 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. When it comes to knowing the true value of features of homes in Oakhurst and Monmouth, The Welter Appraisal Group is second to none. The sales comparison approach to value is usually awarded 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 way of valuing real estate. In this situation, the amount of revenue the property generates is factored in with income produced by nearby properties to determine the current value.

Reconciliation

Examining the data from all approaches, the appraiser is then ready to document an estimated market value for the subject property. It is important to note that while this amount is probably the strongest indication of what a house is worth, it probably will not be the price at which the property closes. Depending on the individual situations of the buyer or seller, their level of urgency or a buyer's desire for that exact property, the closing price of a home can always be driven up or down.Regardless, the appraised value is often employed 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 sell the property again. The bottom line is, an appraiser from The Welter Appraisal Group will guarantee you discover the most fair and balanced property value, so you can make the most informed real estate decisions.