Making Sense of the Appraisal ProcessAcquiring a home can be the largest transaction many of us will ever encounter. It doesn't matter if it's where you raise your family, an additional vacation home or a rental fixer upper, the purchase of real property is a complex transaction that requires multiple parties to pull it all off.
It's likely you are familiar with the parties having a role in the transaction. The real estate agent is the most familiar person in the exchange. Next, the bank provides the money necessary to fund the deal. The title company sees to it that all requirements of the transaction are completed and that the title is clear to transfer from the seller to the purchaser.
So who's responsible for making sure the value of the property is consistent with the purchase price? In comes the appraiser. We provide an unbiased opinion of what a buyer could 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 Corcoran Appraisal Group will ensure you as an interested party are informed.
The inspection is where an appraisal startsOur first responsibility at Corcoran Appraisal Group is to inspect the property to ascertain its true status. We must see features first hand, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly are present and are in the condition a typical buyer would expect them to be. To ensure the stated square footage is accurate and convey the layout of the home, the inspection often requires creating a sketch of the floor plan. Most importantly, we identify any obvious amenities - or defects - that would have an impact on the value of the property.
After the inspection, an appraiser employs two or three approaches when determining the value of the property: paired sales analysis and, in the case of a rental property, an income approach.
Cost ApproachThis is where we pull information on local construction costs, the cost of labor and other factors to determine how much it would cost to replace the property being appraised. This figure usually sets the upper limit on what a property would sell for. The cost approach is also the least used method.
Sales ComparisonAppraisers get to know the subdivisions in which they appraise. We innately understand the value of certain 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 real estate in question. Using knowledge of the value of certain items such as square footage, extra bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we add or subtract from each comparable's sales price 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 - the appraiser may use a third approach to value. In this case, the amount of income the real estate yields is factored in with income produced by similar properties to determine the current value.
Coming Up With the Final ValueCombining information from all approaches, the appraiser is then ready to put down an estimated market value for the property at hand. The estimate of value on the appraisal report is not always what's being paid for the property even though it is likely the best indication of what a property could sell for in an open market. 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 often employed 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. The bottom line is: An appraiser from Corcoran Appraisal Group will guarantee you attain the most accurate property value, so you can make the most informed real estate decisions.