A Description of the Appraisal Process
Purchasing a home can be the most important financial decision many of us may ever consider. It doesn't matter if a main residence, a second vacation property or an investment, purchasing real property is a complex financial transaction that requires multiple parties to pull it all off.
The majority of the participants are quite familiar. The real estate agent is the most known entity in the exchange. Next, the mortgage company provides the financial capital needed to finance the exchange. And ensuring all details of the exchange are completed and that the title is clear to transfer from the seller to the buyer is the title company.
So, who's responsible for making sure the value of the real estate is in line with the amount being paid? This is where the appraiser comes in. We provide an unbiased opinion of what a buyer might expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from B & J APPRAISALS, INC. will ensure, you as an interested party, are informed.
Inspecting the subject property
Our first responsibility at B & J APPRAISALS, INC. is to inspect the property to ascertain its true status. We must actually view aspects of the property, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really are there and are in the condition a reasonable buyer would expect them to be. To make sure the stated square footage has not been misrepresented and illustrate the layout of the home, the inspection often entails creating a sketch of the floorplan. Most importantly, we look for any obvious amenities - or defects - that would have an impact on the value of the house.
Once the site has been inspected, we use two or three approaches to determining the value of the property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.
Here, we use information on local construction costs, labor rates and other factors to ascertain how much it would cost to replace the property being appraised. This estimate usually sets the upper limit on what a property would sell for. The cost approach is also the least used predictor of value.
Analyzing Comparable Sales
Appraisers get to know the neighborhoods 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 vicinity and finds properties which are 'comparable' to the property in question. Using knowledge of the value of 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.
A valid estimate of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. At B & J APPRAISALS, INC., we are an authority when it comes to knowing the worth of real estate features in NEW ROCHELLE and Westchester County neighborhoods. This approach to value is usually given the most weight when an appraisal is for a home sale.
Valuation Using the Income Approach
In the case of income producing properties - rental houses for example - we may use a third approach to value. In this situation, the amount of revenue the property generates is taken into consideration along with other rents in the area for comparable properties to derive the current value.
Putting It All Together
Combining information from all approaches, the appraiser is then ready to put down an estimated market value for the property at hand. The estimate of value on 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 seller motivation, urgency or 'bidding wars' that may adjust an offer or listing price 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. It all comes down to this, an appraiser from B & J APPRAISALS, INC. will guarantee you get the most accurate property value, so you can make the most informed real estate decisions.