Comprehending Appraisals

Their home's purchase is the biggest financial decision many of us will ever encounter. It doesn't matter if where you raise your family, a seasonal vacation home or one of many rentals, purchasing real property is a complex transaction that requires multiple parties to make it all happen.

It's likely you are familiar with the parties having a role in the transaction. The most familiar face in the exchange is the real estate agent. Next, the mortgage company provides the money necessary to fund the transaction. And ensuring all requirements of the transaction are completed and that a clear title transfers to the buyer from the seller is the title company.

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

So, what party makes 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 property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from J B Saunders will ensure, you as an interested party, are informed.

The inspection is where an appraisal starts

To ascertain the true status of the property, it's our responsibility to first perform a thorough inspection. We must see features first hand, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they indeed are present and are in the shape a reasonable buyer would expect them to be. To ensure the stated square footage has not been misrepresented and convey the layout of the property, the inspection often entails creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious features - or defects - that would have an impact on the value of the house.

Once the site has been inspected, an appraiser uses 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

Here, the appraiser pulls information on local building costs, labor rates and other elements to determine how much it would cost to build a property similar to the one being appraised. This estimate usually sets the upper limit 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 neighborhoods in which they appraise. They thoroughly understand the value of certain features to the residents of that area. Then, the appraiser looks up recent sales in close proximity to the subject and finds properties which are 'comparable' to the real estate in question. 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 more accurately portray the features of subject property.

  • For example, if the comparable property has a fireplace and the subject does not, the appraiser may subtract the value of a fireplace from the sales price of the comparable.
  • 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 could sell for can only be determined once all differences between the comps and the subject have been evaluated. When it comes to valuing features of homes in Mount Pleasant and Maury, J B Saunders can't be beat. The sales comparison approach to value is typically given the most consideration when an appraisal is for a real estate sale.

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 real estate generates is taken into consideration along with other rents in the area for comparable properties to give an indicator of the current value.

Coming Up With The Final Value

Examining the data from all approaches, the appraiser is then ready to state an estimated market value for the subject property. The estimate of value at the bottom of the appraisal report is not necessarily the final sales price even though it is likely the best indication of what a property is worth. 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 typically used as a guideline for lenders who don't want to loan a buyer more money than they could recover in case they had to put the property on the market again. Here's what it all boils down to, an appraiser from J B Saunders will help you discover the most accurate property value, so you can make the most informed real estate decisions.