What is an appraisal?
Buying a house
a main residence,
a second vacation property or
a rental fixer upper, purchasing real property is
an involved financial transaction that requires multiple people working in concert to make it all happen.
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Most people are familiar with the parties taking part in the transaction.
The real estate agent is the most familiar person in the exchange.
Then, the bank provides the financial capital necessary to bankroll the transaction.
The title company makes sure that all areas of the sale are completed and that a clear title passes to the buyer from the seller.
So what party is responsible for making sure the value of the property is consistent with the purchase price?
This is where the appraiser comes in. We provide an unbiased opinion 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 North Carolina licensed appraiser from Benchmark Appraising will ensure you as an interested party are informed.
The inspection is where an appraisal starts
To ascertain an accurate status of the property, it's our responsibility to first conduct a thorough inspection.
We must actually see features, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really are present 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 conveying 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, we use two or three approaches when determining the value of real property:
paired sales analysis and, in the case of a rental property, an income approach.
This is where we analyze information on local building costs, the cost of labor and other elements to ascertain how much it would cost to replace the property being appraised. This value commonly sets the upper limit on what a property would sell for. It's also the least used predictor of value.
Appraisers become very familiar with the communities in which they appraise.
We thoroughly understand the value of certain features to the residents of that area.
Then, the appraiser looks up recent transactions in the area and finds properties which are 'comparable' to the subject being appraised. By assigning a dollar value to certain items such as
fireplaces, room layout, appliance upgrades, extra bathrooms or bedrooms, or quality of construction, we adjust the comparable properties so that they are more accurately in line with the features of subject property.
At Benchmark Appraising, we are experts when it comes to knowing the value of real estate features in Kernersville and Forsyth County neighborhoods.
This approach to value is commonly awarded the most importance when an appraisal is for a home exchange.
Say, for example, the comparable has a storm shelter and the subject does not, the appraiser may deduct the value of a storm shelter from the sales price of the comparable home.
If the subject property has an extra half-bathroom and the comparable does not, the appraiser might add an amount to the comparable property.
Valuation Using the Income Approach
A third method of valuing real estate is sometimes used when a neighborhood has a measurable number of rental properties.
In this situation, the amount of revenue the property yields is factored in with income produced by comparable properties to give an indicator of the current value.
Arriving at a Value Conclusion
Analyzing the data from all 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 may 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'.
Regardless, 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 case they had to sell the property again.
At the end of the day: An appraiser from Benchmark Appraising will guarantee you discover the most fair and balanced property value, so you can make profitable real estate decisions.
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Benchmark Appraising PO Box 1117 Kernersville, NC 27285-1117
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