Real Estate Appraisals: A Primer

A home purchase is the most significant financial decision some people might ever consider. Whether it's where you raise your family, a seasonal vacation property or a rental fixer upper, purchasing real property is an involved transaction that requires multiple parties to see it through.

You're probably familiar with the parties taking part in the transaction. The most familiar face in the transaction is the real estate agent. Next, the lender provides the financial capital required to finance the deal. And ensuring all areas of the sale are completed and that a clear title transfers to the buyer from the seller 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, who makes sure the value of the property is in line with the amount being paid? This is where you meet the appraiser. We provide an unbiased estimate 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 Sonner Appraisals will ensure, you as an interested party, are informed.

Inspecting the subject property

To determine an accurate status of the property, it's our duty to first perform a thorough inspection. 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 typical person would expect them to be. To ensure the stated square footage has not been misrepresented and convey the layout of the house, the inspection often entails creating a sketch of the floorplan. Most importantly, the appraiser looks for any obvious amenities - or defects - that would affect the value of the house.

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

Replacement Cost

This is where we pull information on local construction costs, labor rates and other factors to ascertain how much it would cost to construct a property comparable to the one being appraised. This value often sets the upper limit on what a property would sell for. It's also the least used predictor of value.

Sales Comparison

Appraisers become very familiar with the subdivisions in which they appraise. They thoroughly understand the value of certain features to the residents of that area. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are 'comparable' to the home in question. By assigning a dollar value to certain items such as upgraded appliances, extra bathrooms, additional living area, quality of construction, lot size, we add or subtract from each comparable's sales price so that they more accurately portray the features of subject.

Say, for example, the comparable property has an extra half bath that the subject does not, the appraiser may deduct the value of that half bath 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.

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 valuing features of homes in Siler City and Chatham, Sonner Appraisals can't be beat. The sales comparison approach to value is commonly awarded the most weight when an appraisal is for a home sale.

Valuation Using the Income Approach

A third method of valuing a house is sometimes used when a neighborhood has a measurable number of renter occupied properties. In this situation, the amount of income the real estate produces is taken into consideration along with income produced by nearby properties to determine the current value.

Coming Up With The Final Value

Combining information from all approaches, the appraiser is then ready to document an estimated market value for the property in question. It is important to note that while the appraised value is probably the most reliable indication of what a property is worth, it probably will not be the price at which the property closes. Depending on the specific 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 typically 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 Sonner Appraisals will guarantee you attain the most fair and balanced property value, so you can make the most informed real estate decisions.