Comprehending Appraisals

Purchasing a home is the most serious investment many of us may ever make. Whether it's where you raise your family, a seasonal vacation home or a rental fixer upper, purchasing real property is a detailed financial transaction that requires multiple people working in concert to make it all happen.

Practically all the participants are very familiar. The real estate agent is the most recognizable person in the exchange. Then, the mortgage company provides the money required to fund the deal. The title company makes sure that all aspects of the exchange are completed and that the title is clear to pass to the buyer from the seller.

To learn more about appraising, click here to see a short video or call us today to talk about your specific property.

So, what party is responsible for making sure the property is worth 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 property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Carolina Appraisals, Inc. will ensure, you as an interested party, are informed.

The inspection is where an appraisal starts

Our first duty at Carolina Appraisals, Inc. is to inspect the property to determine its true status. We must actually view aspects of the property, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed are there and are in the condition a reasonable person would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is correct and illustrating the layout of the property. Most importantly, we look for any obvious features - or defects - that would affect the value of the house.

Following the inspection, an appraiser uses two or three approaches to determining the value of real property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.

Replacement Cost

Here, we analyze information on local construction costs, labor rates and other elements to calculate how much it would cost to replace the property being appraised. This figure often sets the upper limit on what a property would sell for. It's also the least used method.

Analyzing Comparable Sales

Appraisers are intimately familiar with the subdivisions in which they work. They thoroughly understand the value of certain features to the homeowners of that area. Then, the appraiser researches recent transactions in the neighborhood and finds properties which are 'comparable' to the subject in question. Using knowledge of the value of 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 more accurately portray the features of subject.

  • For example, if the comparable has a fireplace and the subject does not, 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 an amount to the comparable property.

An opinion of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. At Carolina Appraisals, Inc., we are experts when it comes to knowing the value of particular items in Eden and Rockingham County neighborhoods. This approach to value is most often awarded the most weight when an appraisal is for a real estate purchase.

Valuation Using the Income Approach

A third way of valuing approach to value is sometimes used when a neighborhood has a measurable number of rental properties. In this case, the amount of income the real estate produces is factored in with other rents in the area for comparable properties to give an indicator of the current value.

Arriving at a Value Conclusion

Examining the data from all approaches, the appraiser is then ready to stipulate an estimated market value for the property at hand. Note: While this amount is probably the strongest indication of what a property is worth, it may not be the price at which the property closes. Depending on the specific 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.But the appraised value is typically employed as a guideline for lenders who don't want to loan a buyer more money than they could recover in case they had to put the property on the market again. The bottom line is, an appraiser from Carolina Appraisals, Inc. will help you discover the most accurate property value, so you can make wise real estate decisions.