Understanding Appraisals

Buying a home can be the most serious investment some could ever consider. Whether it's a main residence, an additional vacation home or one of many rentals, purchasing real property is a complex transaction that requires multiple parties to pull it all off.

Most people are familiar with the parties having a role in the transaction. The most known person in the transaction is the real estate agent. Then, the mortgage company provides the financial capital necessary to fund the transaction. And ensuring all requirements of the exchange are completed and that the title is clear to pass to the buyer from the seller is the title company.

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So, who's responsible for making sure the value of the property is in line with the amount being paid? This is where you meet the appraiser. We provide an unbiased opinion 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.

Appraisals begin with the inspection

Our first task at Gold Coast Appraisal Group LLC is to inspect the property to determine 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 truly exist and are in the condition a reasonable buyer would expect them to be. To ensure the stated square footage is accurate and convey the layout of the property, 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 house.

Next, after 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.

Replacement Cost

This is where the appraiser pulls information on local construction costs, labor rates and other factors to determine how much it would cost to construct a property nearly identical 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 predictor of value.

Sales Comparison

Appraisers are intimately familiar with the neighborhoods in which they work. They innately understand the value of certain features to the people of that area. Then, the appraiser looks up recent transactions in the neighborhood and finds properties which are 'comparable' to the real estate in question. Using knowledge of the value of certain items such as upgraded appliances, extra bathrooms, additional living area, quality of construction, lot size, we adjust the comparable properties so that they more accurately match the features of subject.

  • Say, for example, the comparable has a fireplace and the subject does not, the appraiser may deduct the value of a fireplace from the sales price of the comparable.
  • If the subject property has an extra half-bathroom and the comparable does not, the appraiser might add an amount to the comparable property.

After all differences have been accounted for, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. 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 usually awarded 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 applied when a neighborhood has a measurable number of rental properties. In this situation, the amount of income the real estate yields is taken into consideration along with income produced by comparable properties to give an indicator of the current value.

Putting It All Together

Analyzing the data from all approaches, the appraiser is then ready to put down an estimated market value for the subject property. It is important to note that while this amount is probably the best indication of what a house is worth, it may not be the price at which the property closes. Depending on the individual situations 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 often used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. The bottom line is, an appraiser from Gold Coast Appraisal Group LLC will help you discover the most fair and balanced property value, so you can make wise real estate decisions.