What Are the Parts of an Appraisal?
A home purchase is the largest financial decision most will ever make. Whether it's where you raise your family, a second vacation home or one of many rentals, purchasing real property is a detailed financial transaction that requires multiple parties to see it through.
Most of the parties participating are very familiar. The most recognizable face in the transaction is the real estate agent. Next, the bank provides the money required to fund the exchange. And the title company ensures that all details of the sale are completed and that the title is clear to transfer from the seller to the buyer.
So, who makes sure the real estate is worth the amount being paid? In comes the appraiser. We provide an unbiased opinion 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 Hoyt Appraisal, LLC will ensure, you as an interested party, are informed.
Appraisals start with the home inspection
To ascertain the true status of the property, it's our duty to first perform a thorough inspection. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly are there and are in the condition a typical buyer would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is correct and illustrating the layout of the property. 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, an appraiser uses two or three approaches to determining the value of the property: sales comparison and, in the case of a rental property, an income approach.
This is where the appraiser analyzes information on local building costs, labor rates and other factors to determine how much it would cost to construct a property nearly identical to the one being appraised. This estimate commonly sets the upper limit on what a property would sell for. The cost approach is also the least used method.
Appraisers become very familiar with the communities in which they appraise. They innately understand the value of specific features to the people of that area. Then, the appraiser researches recent transactions in close proximity to the subject and finds properties which are 'comparable' to the home in question. By assigning a dollar value to certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or extra storage space, we adjust the comparable properties so that they more accurately portray the features of subject.
An opinion of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. At Hoyt Appraisal, LLC, we are experts in knowing the worth of real estate features in Oak Ridge and Morris County neighborhoods. This approach to value is most often given the most importance when an appraisal is for a real estate sale.
Valuation Using the Income Approach
A third method of valuing approach to value is sometimes employed when an area has a reasonable number of rental properties. In this case, the amount of income the property yields is taken into consideration along with other rents in the area for comparable properties to give an indicator of the current value.
Arriving at a Value Conclusion
Combining information from all approaches, the appraiser is then ready to put down an estimated market value for the property in question. It is important to note that while this amount is probably the best indication of what a house is worth, it probably will not be the final sales price. There 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. 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 the event they had to put the property on the market again. At the end of the day, an appraiser from Hoyt Appraisal, LLC will help you discover the most fair and balanced property value, so you can make wise real estate decisions.