Comprehending Appraisals

Buying a home is the biggest transaction most might ever consider. Whether it's a main residence, an additional vacation home 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.

The majority of the people participating are quite familiar. The real estate agent is the most recognizable entity in the transaction. Next, the lender provides the money necessary to finance the exchange. The title company ensures that all areas of the sale are completed and that a clear title passes 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 makes sure the real estate is worth the amount being paid? In comes the appraiser. 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 Collard Appraisal Group, Inc. will ensure, you as an interested party, are informed.

Inspecting the subject property

Our first task at Collard Appraisal Group, Inc. is to inspect the property to determine its true status. We must actually see aspects of the property, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they indeed are there and are in the shape a reasonable person would expect them to be. To make sure the stated size of the property is accurate and document the layout of the home, the inspection often entails creating a sketch of the floorplan. Most importantly, we look for any obvious amenities - or defects - that would affect the value of the property.

Following 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.

Replacement Cost

Here, we pull information on local building costs, labor rates and other factors to calculate how much it would cost to replace the property being appraised. This value often sets the upper limit on what a property would sell for. The cost approach is also the least used method.

Paired Sales Analysis

Appraisers become very familiar with the neighborhoods in which they appraise. They innately understand the value of particular features to the people of that area. Then, the appraiser researches recent sales in the area and finds properties which are 'comparable' to the real estate being appraised. By assigning a dollar value to 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 does not, the appraiser may subtract the value of an irrigation system from the sales price of the comparable home.
But, 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.

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 Collard Appraisal Group, Inc., we are experts when it comes to knowing the worth of real estate features in and Cumberland County neighborhoods. This approach to value is commonly given the most weight when an appraisal is for a home exchange.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - the appraiser may use a third approach to value. In this scenario, the amount of revenue the property yields is factored in with other rents in the area for comparable properties to give an indicator of the current value.

The Bottom Line

Combining information from all approaches, the appraiser is then ready to put down an estimated market value for the subject property. Note: While this amount is probably the most accurate indication of what a property is worth, it probably will not be the price at which the property closes. Prices can always be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. But 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 the event they had to put the property on the market again. It all comes down to this, an appraiser from Collard Appraisal Group, Inc. will guarantee you get the most fair and balanced property value, so you can make the most informed real estate decisions.