Real Estate Appraisals: A PrimerA home purchase is the most important financial decision most will ever consider. It doesn't matter if it's where you raise your family, a second vacation property or a rental fixer upper, purchasing real property is a complex transaction that requires multiple parties to make it all happen.
The majority of the participants are quite familiar. The most familiar entity in the transaction is the real estate agent. Then, the bank provides the financial capital required to fund the deal. The title company makes sure that all requirements of the sale are completed and that the title is clear to transfer from the seller to the buyer.
So who's responsible for making sure the value of the real estate is in line with the amount being paid? This is where you meet the appraiser. We provide an unbiased estimate of what a buyer might expect to pay - or a seller receive - for a parcel of real estate, where both buyer and seller are informed parties. A professional New Jersey licensed appraiser from Stern & Dragoset Appraisal Group LLC will ensure you as an interested party are informed.
Appraisals begin with the inspectionOur first responsibility at Stern & Dragoset Appraisal Group LLC 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, living areas, etc., to ensure they really are present and are in the condition a typical buyer would expect them to be. To ensure the stated size of the property has not been misrepresented and document the layout of the house, the inspection often entails creating a sketch of the floor plan. Most importantly, we identify any obvious amenities - or defects - that would have an impact on the value of the house.
Following the inspection, an appraiser employs two or three approaches when determining the value of real property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.
Cost ApproachHere, the appraiser uses information on local building costs, the cost of labor and other factors to derive how much it would cost to replace the property being appraised. This figure usually sets the upper limit on what a property would sell for. The cost approach is also the least used predictor of value.
Paired Sales AnalysisAppraisers become very familiar with the neighborhoods in which they work. We innately understand the value of particular features to the people of that area. Then, the appraiser looks up recent sales in close proximity to the subject and finds properties which are 'comparable' to the subject being appraised. By assigning a dollar value to certain items such as square footage, additional bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject property.
Valuation Using the Income ApproachIn the case of income producing properties - rental houses for example - we may use an additional method of valuing real estate. In this scenario, the amount of income the real estate yields is factored in with other rents in the area for comparable properties to give an indicator of the current value.
ReconciliationCombining information from all applicable 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 always what's being paid for the property even though it is likely the best indication of a property's market value 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'. But the appraised value is often employed as a guideline for lenders who don't want to loan a buyer more money than the property would likely sell for in an open marketplace. At the end of the day: An appraiser from Stern & Dragoset Appraisal Group LLC will guarantee you attain the most fair and balanced property value, so you can make the most informed real estate decisions.
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