One's home purchase
is
the most important
financial decision
many
will
ever
consider.
It doesn't matter if it's
a primary residence,
a second vacation property or
one of many rentals, purchasing real property is
a complex financial transaction that requires multiple people working in concert to see it through.
To learn more about appraising, click here to see a short video or call us today to talk about your specific property.
Most people are familiar with the parties taking part in the transaction.
The most familiar face in the transaction is the real estate agent.
Then, the mortgage company provides the financial capital required to bankroll the exchange.
The title company makes sure that all areas of the sale are completed and that the title is clear to transfer from the seller to the buyer.
So what party is responsible for making sure the property is consistent with the purchase price?
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 professional New Jersey licensed appraiser from Appraisal Authority LLC - Kevin Burkhardt 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 actually view aspects of the property, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really are present and are in the shape a reasonable person would expect them to be.
To ensure the stated size of the property is accurate and document the layout of the home, the inspection often includes 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 property.
Following the inspection, we use two or three approaches when determining the value of real property:
a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.
Cost Approach
Here, the appraiser uses information on local building costs, labor rates and other factors to ascertain how much it would cost to build a property nearly identical to the one being appraised. This value often sets the upper limit on what a property would sell for. It's also the least used predictor of value.
Sales Comparison
Appraisers become very familiar with the neighborhoods in which they appraise.
We thoroughly 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 subject at hand. By assigning a dollar value to certain items such as
square footage, extra bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we adjust the comparable properties so that they more accurately match the features of subject property.
For example, if the comparable has an irrigation system and the subject does not, the appraiser may subtract 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.
When it comes to associating a value with features of homes in West Caldwell and Essex, Appraisal Authority LLC - Kevin Burkhardt is second to none.
The sales comparison approach to value is commonly awarded the most consideration when an appraisal is for a home purchase.
Valuation Using the Income Approach
A third method of valuing approach to value is sometimes used when a neighborhood has a reasonable number of rental properties.
In this situation, the amount of income the property generates is taken into consideration along with income produced by neighboring properties to give an indicator of the current value.
Reconciliation
Analyzing the data from all approaches, the appraiser is then ready to stipulate an estimated market value for the subject property.
The estimate of value at the bottom of the appraisal report is not necessarily what's being paid for the property even though it is likely the best indication of what a property could sell for in an open market.
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 get back in the event they had to put the property on the market again.
At the end of the day: An appraiser from Appraisal Authority LLC - Kevin Burkhardt will guarantee you discover the most fair and balanced property value, so you can make the most informed real estate decisions.
