Real Property Appraisals: A Primer
Their home's purchase can be the largest financial decision many of us could ever encounter. Whether it's where you raise your family, an additional vacation property or one of many rentals, the purchase of real property is an involved transaction that requires multiple people working in concert to pull it all off.
You're likely to be familiar with the parties taking part in the transaction. The real estate agent is the most familiar entity in the transaction. Then, the lender provides the money required to bankroll the deal. And ensuring all areas of the exchange are completed and that the title is clear to pass to the buyer from the seller is the title company.
So, what party is responsible for making sure the real estate is worth the amount being paid? This is where the appraiser comes in. 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 licensed, certified, professional appraiser from Gold Coast Appraisal Group LLC will ensure, you as an interested party, are informed.
Inspecting the subject property
Our first task at Gold Coast Appraisal Group LLC 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, living areas, etc, to ensure they really exist and are in the condition a reasonable buyer would expect them to be. To make sure the stated size of the property has not been misrepresented and convey the layout of the property, the inspection often requires creating a sketch of the floorplan. Most importantly, the appraiser looks for any obvious features - or defects - that would affect the value of the property.
Following the inspection, we use two or three approaches to determining the value of the property: paired sales analysis and, in the case of a rental property, an income approach.
Here, the appraiser pulls information on local building costs, labor rates and other factors to calculate how much it would cost to construct a property nearly identical to the one being appraised. This figure commonly sets the upper limit on what a property would sell for. It's also the least used method.
Appraisers are intimately familiar with the subdivisions in which they appraise. They innately understand the value of particular features to the people of that area. Then, the appraiser looks up recent sales in the vicinity and finds properties which are 'comparable' to the real estate being appraised. 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 more accurately portray the features of subject.
An opinion of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. When it comes to valuing features of homes in Cliffside Park and Bergen, Gold Coast Appraisal Group LLC can't be beat. This approach to value is typically given the most consideration when an appraisal is for a home purchase.
Valuation Using the Income Approach
A third method of valuing a house is sometimes employed when an area has a reasonable number of renter occupied properties. In this case, the amount of revenue the property generates is factored in with other rents in the area for comparable properties to derive the current value.
Combining information from all applicable approaches, the appraiser is then ready to document an estimated market value for the property in question. Note: While this amount is probably the strongest indication of what a property is worth, it probably will not be the price at which the property closes. There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust the final 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 the event they had to sell the property again. At the end of the day, an appraiser from Gold Coast Appraisal Group LLC will help you discover the most accurate property value, so you can make wise real estate decisions.