Home Appraisals: A Primer

Purchasing real estate is the most important transaction some of us could ever encounter. Whether it's where you raise your family, an additional vacation property or a rental fixer upper, the purchase of real property is an involved financial transaction that requires multiple people working in concert to pull it all off.

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. Next, the mortgage company provides the financial capital needed to fund the deal. And ensuring all aspects 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, what party is responsible for making sure the value of the real estate 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 Atlantic Appraisals will ensure, you as an interested party, are informed.

Inspecting the subject property

Our first responsibility at Atlantic Appraisals is to inspect the property to determine its true status. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they indeed are there and are in the condition a typical buyer would expect them to be. To ensure the stated size of the property is accurate and document the layout of the home, the inspection often entails creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious features - 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: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.

Replacement Cost

This is where we analyze information on local construction costs, labor rates and other elements to ascertain how much it would cost to replace the property being appraised. This figure commonly sets the maximum on what a property would sell for. It's also the least used method.

Sales Comparison

Appraisers get to know the subdivisions in which they appraise. They innately understand the value of particular features to the homeowners of that area. Then, the appraiser researches recent sales in the area and finds properties which are 'comparable' to the subject in question. Using knowledge of the value of certain items such as upgraded appliances, extra bathrooms, additional living area, quality of construction, lot size, we adjust the comparable properties so that they more accurately portray the features of subject property.

  • Say, for example, 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 home.
  • If the subject has an extra half-bathroom and the comparable does not, the appraiser might add an amount to the comparable 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. At Atlantic Appraisals, we are experts when it comes to knowing the worth of particular items in Newport and Carteret County neighborhoods. The sales comparison approach to value is most often awarded the most importance when an appraisal is for a home purchase.

Valuation Using the Income Approach

A third way of valuing real estate is sometimes applied when a neighborhood has a measurable number of rental properties. In this case, the amount of revenue 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.

The Bottom Line

Analyzing the data from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. It is important to note that while the appraised value is probably the best indication of what a house is worth, it may not be the final sales price. 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 recover in case they had to sell the property again. At the end of the day, an appraiser from Atlantic Appraisals will guarantee you get the most accurate property value, so you can make wise real estate decisions.