Understanding Appraisals

Acquiring real estate can be the most significant transaction some people may ever consider. Whether it's where you raise your family, an additional vacation home or a rental fixer upper, the purchase of real property is a complex transaction that requires multiple people working in concert to see it through.

You're probably familiar with the parties having a role in the transaction. The real estate agent is the most familiar face in the transaction. Then, the bank provides the money required to finance the transaction. And ensuring all aspects of the transaction are completed and that a clear title passes from the seller to the purchaser is the title company.

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 real estate is worth the purchase price? This is where the appraiser comes in. 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 Edwards Appraisal Service, Inc. will ensure, you as an interested party, are informed.

Appraisals start with the inspection

Our first responsibility at Edwards Appraisal Service, Inc. is to inspect the property to ascertain its true status. We must see features hands on, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed are present and are in the shape a typical person would expect them to be. To ensure the stated square footage has not been misrepresented and convey the layout of the home, the inspection often requires creating a sketch of the floorplan. Most importantly, we look for any obvious features - or defects - that would have an impact on the value of the house.

Next, after the inspection, 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 the appraiser analyzes information on local construction costs, labor rates and other elements to derive how much it would cost to replace the property being appraised. This figure usually sets the maximum on what a property would sell for. It's also the least used method.

Paired Sales Analysis

Appraisers are intimately familiar with the subdivisions in which they appraise. They thoroughly understand the value of specific features to the people of that area. Then, the appraiser researches recent transactions in close proximity to the subject and finds properties which are 'comparable' to the subject being appraised. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, additional 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.

  • If, for example, the comparable has an extra half bath that the subject doesn't, the appraiser may subtract the value of that half bath from the sales price of the comparable home.
  • If the subject has an extra half-bathroom and the comparable does not, the appraiser might add an amount to the comparable property.

In the end, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. When it comes to knowing the true worth of features of homes in Goldsboro and Wayne, Edwards Appraisal Service, Inc. can't be beat. The sales comparison approach to value is most often given the most consideration when an appraisal is for a real estate sale.

Valuation Using the Income Approach

A third way of valuing real estate is sometimes used when an area has a measurable number of rental properties. In this scenario, the amount of revenue the real estate generates is taken into consideration along with other rents in the area for comparable properties to determine the current value.

Putting It All Together

Combining information from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the property in question. It is important to note that while the appraised value is probably the strongest indication of what a house is worth, it probably will not be the final sales price. 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 used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. The bottom line is, an appraiser from Edwards Appraisal Service, Inc. will guarantee you discover the most accurate property value, so you can make the most informed real estate decisions.