Comprehending Appraisals

Their home's purchase can be the most serious financial decision some might ever consider. Whether it's where you raise your family, a second vacation property or a rental fixer upper, the purchase of real property is an involved financial transaction that requires multiple people working in concert to see it through.

It's likely you are familiar with the parties taking part in the transaction. The real estate agent is the most familiar person in the transaction. Next, the mortgage company provides the money necessary to fund the transaction. And the title company sees to it that all areas of the exchange are completed and that the title is clear to pass to the buyer from the seller.

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

So, who's responsible for making sure the value of the property is in line with the amount being paid? In comes the appraiser. We provide an unbiased opinion of what a buyer could 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 CCR Appraisal Service will ensure, you as an interested party, are informed.

The inspection is where an appraisal starts

To ascertain an accurate status of the property, it's our duty to first complete a thorough inspection. We must physically view aspects of the property, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really are present and are in the condition a reasonable person would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is correct and conveying the layout of the property. Most importantly, the appraiser looks for any obvious features - or defects - that would have an impact on the value of the house.

Next, after the inspection, an appraiser uses two or three approaches to determining the value of real property: sales comparison and, in the case of a rental property, an income approach.

Cost Approach

This is where the appraiser uses information on local building costs, the cost of labor and other factors to determine how much it would cost to replace the property being appraised. This value often sets the maximum on what a property would sell for. It's also the least used predictor of value.

Analyzing Comparable Sales

Appraisers get to know the neighborhoods in which they work. They thoroughly understand the value of particular 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 fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, we adjust the comparable properties so that they are more accurately in line with the features of subject property.

  • For example, if the comparable property has an irrigation system and the subject doesn't, the appraiser may deduct the value of an irrigation system from the sales price of the comparable home.
  • If the subject property has an extra half-bathroom and the comparable does not, the appraiser might add an amount to the comparable property.

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. When it comes to putting a value on features of homes in Morristown and Morris, CCR Appraisal Service can't be beat. This approach to value is most often given the most importance when an appraisal is for a real estate exchange.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - the appraiser may use a third way of valuing a property. In this scenario, the amount of income the property generates is taken into consideration along with other rents in the area for comparable properties to derive the current value.

Putting It All Together

Analyzing the data from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the property in question. It is important to note that 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. Depending on the specific 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.But the appraised value is often employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. Here's what it all boils down to, an appraiser from CCR Appraisal Service will help you get the most accurate property value, so you can make profitable real estate decisions.