Real Property Appraisals: A Primer

Acquiring a home can be the most important investment many could ever encounter. It doesn't matter if a primary residence, an additional vacation property or an investment, purchasing real property is a detailed financial transaction that requires multiple parties to make it all happen.

Practically all the people participating are very familiar. The real estate agent is the most familiar person in the transaction. Then, the lender provides the financial capital necessary to finance the deal. The title company sees to it that all details of the transaction are completed and that a clear title transfers from the seller to the purchaser.

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So, who's responsible for making sure the value of the property is consistent with the amount being paid? This is where the appraiser comes in. We provide an unbiased estimate 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 Nolan Real Estate & Appraisal, LLC will ensure, you as an interested party, are informed.

Inspecting the subject property

To ascertain the true status of the property, it's our responsibility to first conduct a thorough inspection. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really exist and are in the shape a reasonable buyer would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is proper and illustrating the layout of the property. Most importantly, the appraiser looks for any obvious amenities - or defects - that would affect the value of the property.

Following the inspection, we use two or three approaches to determining the value of real property: sales comparison and, in the case of a rental property, an income approach.

Cost Approach

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 value often sets the upper limit on what a property would sell for. The cost approach is also the least used predictor of value.

Analyzing Comparable Sales

Appraisers get to know the communities in which they work. They thoroughly understand the value of specific features to the residents of that area. Then, the appraiser researches recent sales in the area and finds properties which are 'comparable' to the real estate 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 property.

  • Say, for example, the comparable has a fireplace and the subject doesn't, the appraiser may deduct the value of a fireplace 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 a certain amount to the comparable property.

A valid 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 Nolan Real Estate & Appraisal, LLC, we are experts when it comes to knowing the worth of real estate features in Hamilton and Steuben County neighborhoods. The sales comparison approach to value is commonly given the most consideration when an appraisal is for a real estate purchase.

Valuation Using the Income Approach

In 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 revenue the property generates is taken into consideration along with other rents in the area for comparable properties to determine the current value.

Putting It All Together

Examining the data from all approaches, the appraiser is then ready to state an estimated market value for the property at hand. The estimate of value at the bottom of 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 valueDepending 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 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. The bottom line is, an appraiser from Nolan Real Estate & Appraisal, LLC will guarantee you discover the most accurate property value, so you can make the most informed real estate decisions.