Real Estate Appraisals: A Primer
Their home's purchase is the most significant financial decision some people may ever make. Whether it's a main residence, an additional vacation property or one of many rentals, the purchase of real property is a complex financial transaction that requires multiple people working in concert to make it all happen.
Most of the parties participating are quite familiar. The real estate agent is the most known person in the exchange. Next, the bank provides the money needed to fund the exchange. The title company ensures that all areas of the sale are completed and that a clear title passes from the seller to the buyer.
So, what party makes sure the real estate is worth the purchase price? This is where the appraiser comes in. We provide an unbiased estimate 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 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 physically see aspects of the property, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly are present and are in the shape a reasonable person would expect them to be. To ensure the stated size of the property is accurate and illustrate the layout of the home, the inspection often includes creating a sketch of the floorplan. Most importantly, we look for any obvious features - or defects - that would affect the value of the property.
After the inspection, we use two or three approaches to determining the value of real property: paired sales analysis and, in the case of a rental property, an income approach.
Here, we analyze information on local construction costs, the cost of labor and other elements to determine how much it would cost to build a property comparable to the one being appraised. This estimate usually sets the maximum on what a property would sell for. The cost approach is also the least used method.
Analyzing Comparable Sales
Appraisers can tell you a lot about the communities in which they appraise. They innately understand the value of certain features to the homeowners of that area. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are 'comparable' to the home in question. By assigning a dollar value to certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or extra storage space, we add or subtract from each comparable's sales price so that they more accurately match the features of subject.
A valid estimate of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. At Gold Coast Appraisal Group LLC, we are an authority when it comes to knowing the worth of particular items in Cliffside Park and Bergen County neighborhoods. The sales comparison approach to value is most often given the most importance when an appraisal is for a home purchase.
Valuation Using the Income Approach
A third method of valuing real estate is sometimes employed when an area has a measurable number of renter occupied properties. In this scenario, the amount of income the real estate produces is factored in with income produced by similar properties to give an indicator of the current value.
Arriving at a Value Conclusion
Examining the data from all applicable approaches, the appraiser is then ready to document an estimated market value for the subject property. The estimate of value at the bottom of the appraisal report is not always the final sales price even though it is likely the best indication of what a property is worth. Depending on the individual circumstances 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 typically 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. At the end of the day, an appraiser from Gold Coast Appraisal Group LLC will guarantee you discover the most accurate property value, so you can make profitable real estate decisions.