What Goes Into an Appraisal?

A home purchase can be the most serious financial decision many people might ever consider. Whether it's a main residence, an additional vacation home or an investment, purchasing real property is a detailed financial transaction that requires multiple people working in concert to see it through.

Most people are familiar with the parties having a role in the transaction. The most recognizable face in the transaction is the real estate agent. Next, the mortgage company provides the money required to finance the transaction. And the title company makes sure that all details of the sale are completed and that the title is clear to pass from the seller to the buyer.

To learn more about appraising, click here to see a short video or call us today to talk about your specific property.

So, who makes sure the value of the property is in line 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 licensed, certified, professional appraiser from Gold Coast Appraisal Group LLC will ensure, you as an interested party, are informed.

Appraisals begin with the inspection

To ascertain the true status of the property, it's our responsibility to first complete a thorough inspection. We must see aspects of the property 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 reasonable buyer would expect them to be. To ensure the stated size of the property has not been misrepresented and document the layout of the house, the inspection often requires creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious amenities - or defects - that would have an impact on the value of the house.

Following 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.

Cost Approach

This is where we pull information on local construction costs, the cost of labor and other elements to ascertain how much it would cost to replace the property being appraised. This estimate commonly sets the upper limit on what a property would sell for. The cost approach is also the least used predictor of value.

Paired Sales Analysis

Appraisers are intimately familiar with the communities in which they appraise. They innately understand the value of certain features to the people of that area. Then, the appraiser researches recent transactions in the area and finds properties which are 'comparable' to the home being appraised. 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 adjust the comparable properties so that they more accurately portray the features of subject property.

  • For example, if the comparable property has an irrigation system and the subject doesn't, the appraiser may subtract the value of an irrigation system from the sales price of the comparable home.
  • In the case where the subject has something such as an extra half bath that a comparable doesn't have, the appraiser might add the value of that bath to the comparable property.

An opinion 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 experts when it comes to knowing the value of particular items in Cliffside Park and Bergen County neighborhoods. The sales comparison approach to value is most often awarded the most weight when an appraisal is for a home sale.

Valuation Using the Income Approach

A third way of valuing approach to value is sometimes employed when a neighborhood has a reasonable number of renter occupied properties. In this case, the amount of revenue the property yields is taken into consideration along with income produced by neighboring properties to determine the current value.

Reconciliation

Combining information from all applicable approaches, the appraiser is then ready to put down an estimated market value for the property at hand. The estimate of value at the bottom of the appraisal report is not necessarily what's being paid for the property even though it is likely the best indication of what a property is worth. There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust the final price up or down. But the appraised value is typically used as a guideline for lenders who don't want to loan a buyer more money than they could recover 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 guarantee you attain the most fair and balanced property value, so you can make profitable real estate decisions.