Understanding Appraisals

Buying a home is the most serious investment most will ever encounter. It doesn't matter if a main residence, a second vacation home or one of many rentals, purchasing real property is a complex transaction that requires multiple parties to see it through.

Practically all the people involved are quite familiar. The most known person in the transaction is the real estate agent. Next, the bank provides the money needed to finance the exchange. And ensuring all requirements of the sale are completed and that a clear title transfers from the seller to the buyer 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 is responsible for making sure the value of the property is in line with 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 People's Choice Appraisals will ensure, you as an interested party, are informed.

The inspection is where an appraisal begins

Our first responsibility at People's Choice Appraisals is to inspect the property to determine its true status. We must see features hands on, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly exist and are in the condition a reasonable person would expect them to be. To ensure the stated square footage has not been misrepresented and document the layout of the property, the inspection often entails creating a sketch of the floorplan. Most importantly, we look for any obvious amenities - or defects - that would affect the value of the house.

Next, after the inspection, we use 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

This is where we analyze information on local construction costs, the cost of labor and other factors to figure out how much it would cost to replace the property being appraised. This estimate commonly sets the maximum on what a property would sell for. It's also the least used method.

Paired Sales Analysis

Appraisers can tell you a lot about the subdivisions in which they appraise. They innately understand the value of particular features to the people of that area. Then, the appraiser researches recent transactions in the vicinity and finds properties which are 'comparable' to the home at hand. By assigning a dollar value to 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.

  • For example, if the comparable property has an irrigation system and the subject doesn't, the appraiser may deduct the value of an irrigation system from the sales price of the comparable home.
  • 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.

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 People's Choice Appraisals, we are an authority when it comes to knowing the worth of real estate features in Richlands and Onslow County neighborhoods. The sales comparison approach to value is typically given the most weight when an appraisal is for a home sale.

Valuation Using the Income Approach

A third way of valuing a property is sometimes applied when a neighborhood has a reasonable number of renter occupied properties. In this case, the amount of income the property yields is factored in with income produced by nearby properties to derive the current value.

Putting It All Together

Analyzing the data from all applicable approaches, the appraiser is then ready to state an estimated market value for the property in question. 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 a property's valueThere are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust an offer or listing price up or down. Regardless, the appraised value is often used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. At the end of the day, an appraiser from People's Choice Appraisals will guarantee you attain the most accurate property value, so you can make profitable real estate decisions.