An Overview of the Appraisal ProcessOne's home purchase can be the most serious financial decision most of us could ever consider. It doesn't matter if it's a primary residence, a seasonal vacation home or one of many rentals, purchasing real property is a complex financial transaction that requires multiple people working in concert to see it through.
Practically all the participants are quite familiar. The real estate agent is the most known face in the transaction. Then, the bank provides the financial capital required to finance the transaction. Ensuring all aspects of the exchange are completed and that the title is clear to transfer to the buyer from the seller is the title company.
So who makes sure the value of the real estate is consistent with the purchase price? In comes the appraiser. We provide an unbiased opinion 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 York licensed appraiser from Roadrunner Appraisals, Inc. will ensure you as an interested party are informed.
Inspecting the subject propertyOur first responsibility at Roadrunner Appraisals, Inc. is to inspect the property to determine its true status. We must physically view aspects of the property, such as the number of bedrooms and bathrooms, the location, living areas, etc., to ensure they truly are present and are in the shape a typical person would expect them to be. To ensure the stated square footage is accurate and convey the layout of the home, the inspection often includes creating a sketch of the floor plan. Most importantly, we look for any obvious features - or defects - that would have an impact on the value of the property.
Once the site has been inspected, we use two or three approaches when determining the value of the property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.
Replacement CostThis is where the appraiser pulls information on local construction costs, labor rates and other elements to determine how much it would cost to construct a property comparable to the one being appraised. This estimate often sets the maximum on what a property would sell for. It's also the least used method.
Paired Sales AnalysisAppraisers become very familiar with the communities in which they work. We innately understand the value of specific features to the people of that area. Then, the appraiser researches recent sales in the neighborhood and finds properties which are 'comparable' to the subject in question. Using knowledge of the value of 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.
Valuation Using the Income ApproachA third way of valuing real estate is sometimes applied when a neighborhood has a reasonable number of rental properties. In this situation, the amount of income the real estate yields is taken into consideration along with income produced by neighboring properties to derive the current value.
The Bottom LineAnalyzing the data from all applicable approaches, the appraiser is then ready to state an estimated market value for the property in question. Note: While this amount is probably the best indication of what a house would sell for in an open market, it may not be the price at which the property closes. There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust an offer or listing price up or down. Regardless, the appraised value is often used 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. The bottom line is: An appraiser from Roadrunner Appraisals, Inc. will help you attain the most fair and balanced property value, so you can make the most informed real estate decisions.