Understanding the Appraisal Process

Their home's purchase can be the most important financial decision many will ever make. Whether it's a primary residence, a seasonal vacation home or a rental fixer upper, the purchase of real property is a complex financial transaction that requires multiple people working in concert to make it all happen.

You're probably familiar with the parties having a role in the transaction. The real estate agent is the most recognizable face in the transaction. Next, the mortgage company provides the money required to bankroll the exchange. And the title company sees to it that all areas of the sale are completed and that a clear title transfers to the buyer from the seller.

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So, who's responsible for making sure the value of the real estate is consistent with the amount being paid? In comes 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 Robert Payne (336) 870-1397 will ensure, you as an interested party, are informed.

Appraisals start with the inspection

Our first responsibility at Robert Payne (336) 870-1397 is to inspect the property to determine its true status. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really exist and are in the condition a reasonable person would expect them to be. To make sure the stated square footage has not been misrepresented and convey the layout of the house, the inspection often includes creating a sketch of the floorplan. Most importantly, we identify any obvious amenities - or defects - that would affect the value of the property.

Once the site has been inspected, we use two or three approaches to determining the value of the property: sales comparison and, in the case of a rental property, an income approach.

Replacement Cost

This is where we pull information on local construction costs, the cost of labor and other elements to determine how much it would cost to build a property nearly identical to the one being appraised. This estimate usually sets the maximum on what a property would sell for. It's also the least used method.

Paired Sales Analysis

Appraisers get to know the neighborhoods in which they appraise. They thoroughly understand the value of certain features to the homeowners of that area. Then, the appraiser researches recent transactions in the vicinity and finds properties which are 'comparable' to the property in question. By assigning a dollar value to certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or extra storage space, we add or subtract from each comparable's sales price so that they more accurately portray the features of subject property.

For example, if the comparable has a storm shelter and the subject doesn't, the appraiser may subtract the value of a storm shelter from the sales price of the comparable home.
However, if the subject has an extra half-bathroom and the comparable does not, the appraiser might add an amount to the comparable property.

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 Robert Payne (336) 870-1397, we are an authority in knowing the value of real estate features in High Point and Guilford County neighborhoods. This approach to value is typically awarded the most importance when an appraisal is for a home sale.

Valuation Using the Income Approach

A third method of valuing real estate is sometimes applied when an area has a measurable number of renter occupied properties. In this case, the amount of income the real estate produces is factored in with income produced by nearby properties to derive the current value.

The Bottom Line

Combining information from all applicable approaches, the appraiser is then ready to document an estimated market value for the subject property. The estimate of value on the appraisal report is not always the final sales price even though it is likely the best indication of a property's valuePrices can always 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 used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. At the end of the day, an appraiser from Robert Payne (336) 870-1397 will help you attain the most accurate property value, so you can make profitable real estate decisions.