What is an appraisal?
One’s home purchase is the largest financial decision some people could ever make. It doesn’t matter if it’s a primary residence, an additional vacation property or one of many rentals, the purchase of real property is an involved financial transaction that requires multiple parties to see it through.
To learn more about appraising, call us today to talk about your specific property.
Most people are familiar with the parties having a role in the transaction. The most familiar entity in the transaction is the real estate agent. Then, the bank provides the money necessary to finance the exchange. The title company sees to it that all requirements of the transaction are completed and that the title is clear to transfer to the buyer from the seller.
So what party makes sure the property 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 property, where both buyer and seller are informed parties. A professional New York licensed appraiser from New York Appraisers will ensure you as an interested party are informed.
The inspection is where an appraisal starts
To determine an accurate status of the property, it’s our duty to first perform a thorough inspection. We must see features first hand, such as the number of bedrooms and bathrooms, the location, living areas, etc., to ensure they truly exist and are in the condition a typical buyer would expect them to be. To ensure the stated size of the property is accurate and illustrate the layout of the property, the inspection often requires creating a sketch of the floor plan. Most importantly, we identify any obvious amenities – or defects – that would affect the value of the property.
Back at the office, we use two or three approaches when determining the value of the property: sales comparison and, in the case of a rental property, an income approach.
Here, we gather information on local building costs, the cost of labor and other factors to ascertain how much it would cost to replace the property being appraised. This estimate usually sets the maximum on what a property would sell for. It’s also the least used method.
Analyzing Comparable Sales
Appraisers get to know the neighborhoods in which they work. We thoroughly understand the value of certain features to the residents of that area. Then, the appraiser researches recent transactions in close proximity to the subject and finds properties which are ‘comparable’ to the property being appraised. By assigning a dollar value to certain items such as square footage, extra bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we add or subtract from each comparable’s sales price so that they are more accurately in line with the features of subject property.
- Say, for example, the comparable has an irrigation system and the subject doesn’t, the appraiser may deduct the value of an irrigation system from the sales price of the comparable home.
- 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.
At New York Appraisers, we are an authority in knowing the value of real estate features in Saratoga Springs and Saratoga County neighborhoods. The sales comparison approach to value is most often given the most consideration when an appraisal is for a home purchase.
Valuation Using the Income Approach
In the case of income producing properties – rental houses for example – we may use an additional approach to value. In this scenario, the amount of income the property yields is taken into consideration along with other rents in the area for comparable properties to give an indicator of the current value.
Putting It All Together
Examining the data from all applicable approaches, the appraiser is then ready to state an estimated market value for the property in question. The estimate of value on the appraisal report is not necessarily what’s being paid for the property even though it is likely the best indication of what a property could sell for in an open market. 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 typically used as a guideline for lenders who don’t want to loan a buyer more money than they could get back in case they had to sell the property again. The bottom line is: An appraiser from New York Appraisers will help you get the most fair and balanced property value, so you can make the most informed real estate decisions.