What Goes Into an Appraisal?
A home purchase can be the most significant investment many people might ever consider. It doesn't matter if where you raise your family, a seasonal vacation home or a rental fixer upper, the purchase of real property is a complex transaction that requires multiple people working in concert to see it through.
You're probably familiar with the parties having a role in the transaction. The real estate agent is the most known face in the transaction. Next, the mortgage company provides the money required to fund the transaction. And the title company makes sure that all aspects of the transaction are completed and that the title is clear to pass from the seller to the buyer.
So, what party makes sure the property is worth the purchase price? This is where you meet 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 Ru Appraisals, LLC will ensure, you as an interested party, are informed.
Appraisals begin with the property inspection
Our first duty at Ru Appraisals, LLC is to inspect the property to ascertain its true status. We must physically view features, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they indeed are present and are in the condition a reasonable buyer would expect them to be. To make sure the stated square footage is accurate and describe the layout of the house, the inspection often includes creating a sketch of the floorplan. Most importantly, the appraiser looks for any obvious features - or defects - that would have an impact on the value of the property.
Next, after the inspection, we use two or three approaches to determining the value of real property: sales comparison and, in the case of a rental property, an income approach.
This is where we analyze information on local construction costs, the cost of labor and other elements to derive how much it would cost to construct a property similar 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 method.
Paired Sales Analysis
Appraisers get to know the neighborhoods in which they appraise. They innately understand the value of specific 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 property being appraised. Using knowledge of the value of certain items such as upgraded appliances, additional bathrooms, additional living area, quality of construction, lot size, we add or subtract from each comparable's sales price so that they more accurately portray the features of subject.
Once all necessary adjustments have been made, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At Ru Appraisals, LLC, we are an authority when it comes to knowing the worth of real estate features in Whiting and Ocean County neighborhoods. The sales comparison approach to value is most often awarded the most importance when an appraisal is for a home purchase.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - the appraiser may use an additional method of valuing real estate. In this situation, the amount of income the real estate yields is taken into consideration along with income produced by neighboring properties to give an indicator of the current value.
Coming Up With The Final Value
Analyzing the data from all approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. It is important to note that while the appraised value is probably the most accurate indication of what a property is worth, it may not be the final sales price. 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.But the appraised value is often 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 Ru Appraisals, LLC will help you get the most accurate property value, so you can make wise real estate decisions.