A Description of the Appraisal ProcessGetting a house can be the most serious transaction some will ever make. Whether it's a primary residence, a second vacation property or an investment, purchasing real property is a detailed financial transaction that requires multiple people working in concert to pull it all off.
Most of the participants are quite familiar. The most known person in the exchange is the real estate agent. Next, the mortgage company provides the money required to fund the transaction. The title company sees to it that all requirements of the transaction are completed and that a clear title transfers from the seller to the purchaser.
So what party is responsible for making sure the property is consistent with the purchase price? In comes 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 professional New Jersey licensed appraiser from Cape Appraisal & Consulting Services,LLC will ensure you as an interested party are informed.
Inspecting the subject propertyTo ascertain an accurate status of the property, it's our duty to first complete a thorough inspection. We must physically see features, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really exist and are in the shape a reasonable person would expect them to be. The inspection often includes a sketch of the floor plan, ensuring the square footage is accurate and conveying the layout of the property. Most importantly, the appraiser looks for any obvious amenities - or defects - that would affect the value of the house.
Next, after the inspection, we use two or three approaches when determining the value of the property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.
Cost ApproachThis is where we pull information on local construction costs, the cost of labor and other factors to ascertain how much it would cost to build a property nearly identical to the one being appraised. This figure commonly sets the maximum on what a property would sell for. It's also the least used predictor of value.
Sales ComparisonAppraisers are intimately familiar with the neighborhoods in which they work. We innately understand the value of specific features to the residents of that area. Then, the appraiser researches recent transactions in close proximity to the subject and finds properties which are 'comparable' to the subject at hand. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, extra bathrooms or bedrooms, or quality of construction, we add or subtract from each comparable's sales price so that they more accurately portray the features of subject property.
Valuation Using the Income ApproachA third method of valuing real estate is sometimes employed when an area has a reasonable number of renter occupied properties. In this situation, the amount of revenue the property generates is taken into consideration along with income produced by neighboring properties to determine the current value.
Coming Up With the Final ValueAnalyzing the data from all applicable approaches, the appraiser is then ready to put down an estimated market value for the property at hand. It is important to note that while the appraised value is probably the strongest indication of what a property would sell for in an open market, it probably will not be the final sales price. 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 recover in case they had to put the property on the market again. It all comes down to this: An appraiser from Cape Appraisal & Consulting Services,LLC will guarantee you get the most fair and balanced property value, so you can make wise real estate decisions.