What Is an Appraisal?

Their home's purchase is the largest transaction many could ever consider. Whether it's a primary residence, an additional vacation home or a rental fixer upper, the purchase of real property is an involved transaction that requires multiple people working in concert to see it through.

Most of the parties involved are quite familiar. The most familiar face in the exchange is the real estate agent. Next, the bank provides the financial capital required to finance the transaction. And the title company makes sure that all details of the sale are completed and that the title is clear to transfer to the buyer from the seller.

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 real estate is worth the amount being paid? In comes the appraiser. We provide an unbiased estimate of what a buyer could expect to pay — or a seller receive — for a property, 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

To ascertain an accurate status of the property, it's our duty to first perform a thorough inspection. We must physically see aspects of the property, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed are there and are in the shape a reasonable buyer would expect them to be. To ensure the stated size of the property is accurate and illustrate the layout of the home, the inspection often requires 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.

Back at the office, an appraiser uses two or three approaches to determining the value of the property: paired sales analysis and, in the case of a rental property, an income approach.

Replacement Cost

Here, the appraiser analyzes information on local construction costs, the cost of labor and other factors to determine how much it would cost to construct a property similar to the one being appraised. This figure usually sets the maximum on what a property would sell for. It's also the least used method.

Sales Comparison

Appraisers are intimately familiar with the subdivisions in which they appraise. They innately understand the value of certain features to the residents of that area. Then, the appraiser researches recent sales in the area and finds properties which are 'comparable' to the subject in question. 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 are more accurately in line with the features of subject property.

Say, for example, the comparable has a fireplace and the subject doesn't, the appraiser may deduct the value of a fireplace from the sales price of the comparable.
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.

A valid estimate of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. At People's Choice Appraisals, we are experts when it comes to knowing the worth of real estate features in Richlands and Onslow County neighborhoods. This approach to value is commonly given the most importance when an appraisal is for a real estate exchange.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - the appraiser may use a third way of valuing real estate. In this situation, the amount of income the real estate produces is taken into consideration along with income produced by similar properties to give an indicator of the current value.

Arriving at a Value Conclusion

Combining information from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the property in question. The estimate of value on the appraisal report is not always what's being paid for the property even though it is likely the best indication of what a property is worth. Depending on the specific circumstances 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 the property is actually worth. Here's what it all boils down to, an appraiser from People's Choice Appraisals will guarantee you get the most fair and balanced property value, so you can make profitable real estate decisions.