Decoding the Appraisal Process
Acquiring a house is the most important financial decision some could ever consider. Whether it's where you raise your family, a second vacation home or one of many rentals, the purchase of real property is an involved transaction that requires multiple people working in concert to make it all happen.
Most of the parties involved are quite familiar. The most recognizable entity in the transaction is the real estate agent. Next, the lender provides the money necessary to fund the transaction. And ensuring all requirements of the sale are completed and that a clear title transfers to the buyer from the seller is the title company.
So, what party makes 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 property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Gold Coast Appraisal Group LLC will ensure, you as an interested party, are informed.
Inspecting the subject property
To determine the true status of the property, it's our duty to first perform a thorough inspection. We must actually view aspects of the property, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed are present and are in the condition a reasonable buyer 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 requires creating a sketch of the floorplan. Most importantly, we look for any obvious amenities - or defects - that would affect the value of the property.
Once the site has been inspected, 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.
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 similar to the one being appraised. This estimate commonly sets the upper limit on what a property would sell for. It's also the least used method.
Appraisers can tell you a lot about the subdivisions in which they work. They innately understand the value of particular features to the people of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the real estate 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 adjust the comparable properties so that they are more accurately in line with the features of subject.
In the end, 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 Cliffside Park and Bergen, Gold Coast Appraisal Group LLC is second to none. The sales comparison approach to value is most often awarded the most consideration when an appraisal is for a home exchange.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - the appraiser may use an additional approach to value. In this situation, the amount of income the property produces is factored in with income produced by similar properties to determine the current value.
Arriving at a Value Conclusion
Combining information from all applicable approaches, the appraiser is then ready to document an estimated market value for the property in question. The estimate of value on the appraisal report is not necessarily what's being paid for the property even though it is likely the best indication of a property's valueThere 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 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 put the property on the market again. The bottom line is, an appraiser from Gold Coast Appraisal Group LLC will help you attain the most accurate property value, so you can make profitable real estate decisions.