An Overview of the Appraisal Process
Getting a home is the most important investment some of us might ever encounter. Whether it's a primary residence, a seasonal vacation home or an investment, purchasing real property is a complex transaction that requires multiple people working in concert to pull it all off.
You're probably familiar with the parties taking part in the transaction. The most recognizable person in the transaction is the real estate agent. Then, the bank provides the financial capital needed to finance the deal. And ensuring all areas of the transaction are completed and that a clear title passes from the seller to the buyer is the title company.
So, what party is responsible for making sure the value of the real estate is consistent with the purchase price? This is where you meet the appraiser. We provide an unbiased estimate of what a buyer could expect to pay — or a seller receive — for a parcel of real estate, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Tortorella Appraisals, Inc. will ensure, you as an interested party, are informed.
The inspection is where an appraisal starts
Our first task at Tortorella Appraisals, Inc. is to inspect the property to determine its true status. We must physically view features, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really are present and are in the shape a reasonable buyer would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is correct and conveying the layout of the property. Most importantly, we identify any obvious amenities - 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 to determining the value of real property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.
This is where the appraiser pulls information on local building costs, the cost of labor and other elements to determine how much it would cost to replace the property being appraised. This estimate often sets the maximum on what a property would sell for. The cost approach is also the least used method.
Paired Sales Analysis
Appraisers become very familiar with the neighborhoods in which they appraise. They innately understand the value of certain features to the people of that area. Then, the appraiser researches recent transactions in the area and finds properties which are 'comparable' to the property at hand. 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.
A true 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 Tortorella Appraisals, Inc., we are experts when it comes to knowing the value of real estate features in Kingston and Saratoga County neighborhoods. This approach to value is commonly awarded 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 - the appraiser may use a third way of valuing real estate. In this scenario, the amount of revenue the real estate produces is taken into consideration along with other rents in the area for comparable properties to derive the current value.
Arriving at a Value Conclusion
Examining the data from all approaches, the appraiser is then ready to document 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 what a property is worth. Depending on the individual situations 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 often used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. It all comes down to this, an appraiser from Tortorella Appraisals, Inc. will help you discover the most fair and balanced property value, so you can make the most informed real estate decisions.