Real Property Appraisals: A PrimerOwning real estate is the biggest investment some will ever encounter. It doesn't matter if it's a main residence, an additional vacation home or a rental fixer upper, purchasing real property is a detailed financial transaction that requires multiple people working in concert to see it through.
Practically all the participants are quite familiar. The most known entity in the transaction is the real estate agent. Then, the lender provides the financial capital required to fund the deal. The title company makes sure that all aspects of the sale are completed and that a clear title transfers to the buyer from the seller.
So what party makes sure the value of the property is consistent with the purchase price? In comes the appraiser. We provide an unbiased estimate 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 York licensed appraiser from Nace Appraisal Group will ensure you as an interested party are informed.
Inspecting the subject propertyTo determine the true status of the property, it's our duty to first complete a thorough inspection. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, living areas, etc., to ensure they indeed are there and are in the shape a typical buyer would expect them to be. The inspection often includes a sketch of the house, 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 affect the value of the property.
Next, after the inspection, an appraiser employs two or three approaches when determining the value of real property: paired sales analysis and, in the case of a rental property, an income approach.
Cost ApproachHere, the appraiser pulls information on local construction costs, the cost of labor and other elements to derive how much it would cost to replace the property being appraised. This figure commonly sets the upper limit on what a property would sell for. It's also the least used and least reliable method for residential property.
Paired Sales AnalysisAppraisers get to know the neighborhoods in which they appraise. We innately understand the value of particular features to the homeowners of that area. Then, the appraiser looks up recent transactions in the vicinity and finds properties which are 'comparable' to the home in question. By assigning a dollar value to certain items such as square footage, additional bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we add or subtract from each comparable's sale price so that they more accurately portray the features of subject.
Valuation Using the Income ApproachA third method of valuing a residential property is sometimes employed when a neighborhood has a reasonable number of renter occupied properties. In this scenario, the amount of revenue the property yields is taken into consideration along with income produced by nearby properties to derive the current value.
ReconciliationAnalyzing the data from all three approaches, the appraiser is then ready to state an estimated market value for the property at hand. The estimate of value at the bottom of the appraisal report is not always the final sales price even though it is likely the best indication of what a property could sell for in an open market. Depending on the specific 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 employed as a guideline for lenders who don't want to loan a buyer more money than the property would likely sell for in an open marketplace. The bottom line is: An appraiser from Nace Appraisal Group will guarantee you attain the most fair and balanced property value, so you can make wise real estate decisions.