Comprehending Appraisals

A home purchase is the most important transaction some of us could ever make. Whether it's where you raise your family, a second vacation home or an investment, the purchase of real property is an involved financial transaction that requires multiple people working in concert to make it all happen.

The majority of the participants are quite familiar. The most recognizable person in the exchange is the real estate agent. Then, the lender provides the financial capital necessary to bankroll the deal. The title company ensures that all areas of the transaction are completed and that a clear title transfers from the seller to the purchaser.

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 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 Tri-State Appraisal Services, Inc. will ensure, you as an interested party, are informed.

Appraisals begin with the property inspection

Our first duty at Tri-State Appraisal Services, Inc. is to inspect the property to determine its true status. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they indeed are present and are in the condition a reasonable buyer would expect them to be. To make sure the stated size of the property has not been misrepresented and illustrate the layout of the house, the inspection often includes 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.

Once the site has been inspected, an appraiser uses two or three approaches to determining the value of the property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.

Cost Approach

Here, we use information on local building costs, labor rates and other factors to calculate how much it would cost to construct a property comparable to the one being appraised. This value commonly sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.

Paired Sales Analysis

Appraisers get to know the neighborhoods in which they work. They innately understand the value of certain features to the people of that area. Then, the appraiser researches recent sales in the neighborhood and finds properties which are 'comparable' to the home at hand. By assigning a dollar value to certain items such as upgraded appliances, extra bathrooms, additional living area, quality of construction, lot size, we add or subtract from each comparable's sales price so that they more accurately match the features of subject property.

  • For example, if the comparable property has an irrigation system and the subject does not, the appraiser may deduct the value of an irrigation system from the sales price of the comparable.
  • If the subject property has an extra half-bathroom and the comparable does not, the appraiser might add an amount to the comparable property.

After all differences have been accounted for, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At Tri-State Appraisal Services, Inc., we are experts in knowing the worth of real estate features in Far Rockaway and Queens County neighborhoods. The sales comparison approach to value is usually awarded 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 - we may use an additional way of valuing real estate. In this case, the amount of revenue the real estate generates is factored in with other rents in the area for comparable properties to give an indicator of the current value.

Reconciliation

Combining information from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. It is important to note that while this amount is probably the most reliable indication of what a house is worth, it probably will not be the price at which the property closes. There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust the final price up or down. Regardless, the appraised value is often used as a guideline for lenders who don't want to loan a buyer more money than they could recover in case they had to put the property on the market again. The bottom line is, an appraiser from Tri-State Appraisal Services, Inc. will guarantee you get the most fair and balanced property value, so you can make profitable real estate decisions.