Comprehending Appraisals

Acquiring real estate is the most serious transaction some people could ever encounter. Whether it's where you raise your family, an additional vacation property or a rental fixer upper, purchasing real property is a detailed financial transaction that requires multiple parties to pull it all off.

Most people are familiar with the parties taking part in the transaction. The real estate agent is the most familiar entity in the transaction. Next, the bank provides the financial capital needed to bankroll the transaction. And the title company sees to it that all details of the exchange are completed and that the title is clear to transfer 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, who makes sure the real estate is worth the purchase price? This is where you meet the appraiser. 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 Vision Appraisal Group will ensure, you as an interested party, are informed.

Appraisals begin with the property inspection

Our first duty at Vision Appraisal Group is to inspect the property to ascertain its true status. We must see features first hand, 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 typical buyer would expect them to be. To make sure the stated square footage has not been misrepresented and describe the layout of the property, the inspection often entails creating a sketch of the floorplan. Most importantly, we look for any obvious features - or defects - that would have an impact on the value of the house.

Back at the office, we use 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.

Replacement Cost

Here, we pull information on local construction costs, labor rates and other factors to determine how much it would cost to construct a property nearly identical to the one being appraised. This estimate often sets the upper limit on what a property would sell for. It's also the least used predictor of value.

Analyzing Comparable Sales

Appraisers can tell you a lot about the subdivisions in which they work. They innately understand the value of particular features to the residents of that area. Then, the appraiser looks up recent sales in close proximity to the subject and finds properties which are 'comparable' to the property 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 add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject.

  • For example, if the comparable has a storm shelter and the subject does not, the appraiser may subtract the value of a storm shelter 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.

A true estimate of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. At Vision Appraisal Group, we are an authority in knowing the worth of particular items in Raleigh and Wake County neighborhoods. The sales comparison approach to value is typically awarded the most consideration when an appraisal is for a real estate sale.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - the appraiser may use a third approach to value. In this situation, the amount of income the property generates is factored in with other rents in the area for comparable properties to determine the current value.

Arriving at a Value Conclusion

Analyzing the data from all approaches, the appraiser is then ready to state an estimated market value for the property in question. Note: While this amount is probably the most reliable indication of what a property is worth, it may not be the price at which the property closes. Depending on the individual circumstances of the buyer or seller, their level of urgency or a buyer's desire for that exact property, the closing price of a home can always be driven up or down.Regardless, the appraised value is typically used as a guideline for lenders who don't want to loan a buyer more money than they could recover in the event they had to put the property on the market again. Here's what it all boils down to, an appraiser from Vision Appraisal Group will help you discover the most accurate property value, so you can make profitable real estate decisions.