What are the components of an appraisal?Purchasing a home can be the most important financial decision most people might ever encounter. Whether it's where you raise your family, a seasonal vacation property or one of many rentals, the purchase of real property is an involved transaction that requires multiple people working in concert to pull it all off.
You're likely to be familiar with the parties having a role in the transaction. The real estate agent is the most known entity in the transaction. Next, the mortgage company provides the money required to bankroll the exchange. Ensuring all requirements of the exchange are completed and that the title is clear to pass from the seller to the buyer is the title company.
So who's responsible for making sure the real estate is consistent with 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 parcel of real estate, where both buyer and seller are informed parties. A professional New Jersey licensed appraiser from Platinum Appraisal Services will ensure you as an interested party are informed.
Inspecting the subject propertyTo ascertain an accurate status of the property, it's our duty to first perform a thorough inspection. We must physically see features, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really exist and are in the condition a reasonable person would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is accurate and illustrating the layout of the property. Most importantly, the appraiser looks for any obvious amenities - or defects - that would have an impact on the value of the house.
Back at the office, an appraiser employs two or three approaches when determining the value of the property: sales comparison and, in the case of a rental property, an income approach.
Replacement CostHere, the appraiser gathers information on local building costs, the cost of labor and other elements to determine how much it would cost to replace the property being appraised. This value often sets the upper limit on what a property would sell for. It's also the least used method.
Paired Sales AnalysisAppraisers are intimately familiar with the neighborhoods in which they appraise. We innately understand the value of particular features to the residents of that area. Then, the appraiser researches recent transactions in the vicinity and finds properties which are 'comparable' to the home in question. By assigning a dollar value to certain items such as fireplaces, room layout, appliance upgrades, additional 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.
Valuation Using the Income ApproachA third way of valuing a property is sometimes applied when a neighborhood has a reasonable number of rental properties. In this situation, the amount of income the real estate generates is taken into consideration along with other rents in the area for comparable properties to derive the current value.
ReconciliationCombining information from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the property in question. It is important to note that while the appraised value is probably the strongest indication of what a property would sell for in an open market, it probably will not be the final sales price. It's not uncommon for prices to be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. But the appraised value is often used as a guideline for lenders who don't want to loan a buyer more money than the property would likely sell for in an open marketplace. It all comes down to this: An appraiser from Platinum Appraisal Services will guarantee you get the most accurate property value, so you can make the most informed real estate decisions.