Comprehending Appraisals
Getting a home can be the largest investment some people may ever consider. It doesn’t matter if where you raise your family, a second vacation home or an investment, purchasing real property is a complex transaction that requires multiple people working in concert to see it through.
Most people are familiar with the parties having a role in the transaction. The real estate agent is the most familiar entity in the transaction. Next, the bank provides the money required to fund the deal. The title company makes sure that all requirements of the exchange are completed and that the title is clear to transfer from the seller to the buyer.
So, who’s responsible for making sure the value of the property is consistent with the purchase price? In comes the appraiser. We provide an unbiased estimate 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 licensed, certified, professional appraiser from CZ Appraisal will ensure, you as an interested party, are informed.
Appraisals begin with the inspection
Our first duty at CZ Appraisal is to inspect the property to determine its true status. We must actually view features, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly are present and are in the condition a reasonable buyer would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is correct and illustrating the layout of the property. Most importantly, we identify any obvious amenities – or defects – that would have an impact on the value of the house.
Back at the office, 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 we use information on local construction costs, labor rates and other factors to figure out how much it would cost to replace the property being appraised. This value commonly sets the maximum on what a property would sell for. It’s also the least used predictor of value.
Paired Sales Analysis
Appraisers can tell you a lot about the communities in which they work. 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 at hand. By assigning a dollar value to certain items such as upgraded appliances, additional bathrooms, additional living area, quality of construction, lot size, we add or subtract from each comparable sales price so that they more accurately portray the features of subject property.
- For example, if the comparable property has an irrigation system and the subject does not, the appraiser may deduct the value of an irrigation system from the sales price of the comparable.
- But, in the case where the subject has something such as an extra half bath that a comparable doesn’t have, the appraiser might add the value of that bath 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 CZ Appraisal, we are an authority in knowing the value of real estate features in Triangle. The sales comparison approach to value is typically given the most consideration when an appraisal is for a real estate exchange.