Home Appraisals: A Primer
A home purchase can be the most serious investment most people might ever consider. Whether it's where you raise your family, a seasonal vacation home or an investment, purchasing real property is an involved financial transaction that requires multiple people working in concert to make it all happen.
The majority of the parties participating are quite familiar. The real estate agent is the most familiar face in the exchange. Then, the bank provides the financial capital necessary to bankroll the transaction. And ensuring all details of the transaction are completed and that a clear title transfers from the seller to the purchaser is the title company.
So, what party makes sure the property 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 Moye & Associates, Inc. will ensure, you as an interested party, are informed.
The inspection is where an appraisal begins
Our first task at Moye & Associates, Inc. is to inspect the property to determine its true status. We must physically see aspects of the property, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they truly are there and are in the shape a reasonable buyer would expect them to be. To ensure the stated size of the property has not been misrepresented and describe the layout of the property, 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.
Once the site has been inspected, we use two or three approaches to determining the value of real property: paired sales analysis and, in the case of a rental property, an income approach.
This is where we use information on local building costs, the cost of labor and other factors to derive how much it would cost to build a property nearly identical to the one being appraised. This value usually sets the upper limit on what a property would sell for. It's also the least used method.
Paired Sales Analysis
Appraisers become very familiar with the communities in which they appraise. They innately understand the value of particular features to the people of that area. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are 'comparable' to the subject 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 adjust the comparable properties so that they more accurately match the features of subject property.
Once all necessary adjustments have been made, 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 valuing features of homes in Raleigh and Wake, Moye & Associates, Inc. is second to none. The sales comparison approach to value is commonly given the most importance when an appraisal is for a home purchase.
Valuation Using the Income Approach
A third way of valuing a property is sometimes used when an area has a reasonable number of renter occupied properties. In this case, the amount of income the property produces is taken into consideration along with other rents in the area for comparable properties to give an indicator of the current value.
Examining the data from all applicable approaches, the appraiser is then ready to state an estimated market value for the property in question. Note: While the appraised value is probably the most reliable indication of what a house is worth, it may not be the price at which the property closes. 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'. Regardless, the appraised value is often employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. Here's what it all boils down to, an appraiser from Moye & Associates, Inc. will help you get the most accurate property value, so you can make wise real estate decisions.