An Overview of the Appraisal ProcessPurchasing a home can be the most important investment many might ever encounter. Whether it's where you raise your family, an additional vacation property or a rental fixer upper, the purchase of real property is an involved transaction that requires multiple parties to see it through.
Most of the people participating are very familiar. The most recognizable face in the transaction is the real estate agent. Then, the bank provides the money necessary to bankroll the transaction. Ensuring all areas of the transaction are completed and that the title is clear to transfer from the seller to the buyer is the title company.
So what party is responsible for making sure the value of 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 North Carolina licensed appraiser from Loveland Properties and Appraisal will ensure you as an interested party are informed.
Appraisals begin with the property inspectionOur first task at Loveland Properties and Appraisal 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, amenities, etc., to ensure they truly are there and are in the shape a reasonable buyer would expect them to be. To make sure the stated size of the property has not been misrepresented and document the layout of the house, the inspection often entails creating a sketch of the floor plan. Most importantly, the appraiser looks for any obvious features - or defects - that would have an impact on the value of the house.
Back at the office, 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 use information on local construction costs, labor rates and other factors to figure out how much it would cost to construct a property similar to the one being appraised. This value usually sets the upper limit on what a property would sell for. It's also the least used predictor of value.
Sales ComparisonAppraisers can tell you a lot about the communities in which they work. We thoroughly understand the value of certain features to the homeowners of that area. Then, the appraiser researches recent transactions in close proximity to the subject and finds properties which are 'comparable' to the subject being appraised. Using knowledge of the value of certain items such as square footage, additional bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we adjust the comparable properties so that they are more accurately in line with the features of subject property.
Valuation Using the Income ApproachA third way of valuing a house is sometimes applied when an area has a reasonable number of rental properties. In this scenario, the amount of revenue the real estate produces is factored in with income produced by nearby properties to determine the current value.
ReconciliationAnalyzing the data from all applicable approaches, the appraiser is then ready to state an estimated market value for the property at hand. The estimate of value on the appraisal report is not always the final sales price even though it is likely the best indication of a property's market value 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. Regardless, the appraised value is often employed 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 Loveland Properties and Appraisal will help you discover the most fair and balanced property value, so you can make profitable real estate decisions.