What Is an Appraisal?
Their home's purchase can be the most significant investment most will ever make. It doesn't matter if a primary residence, an additional vacation home or one of many rentals, the purchase of real property is a complex financial transaction that requires multiple people working in concert to see it through.
It's likely you are familiar with the parties having a role in the transaction. The most recognizable entity in the exchange is the real estate agent. Next, the lender provides the money necessary to fund the transaction. The title company ensures that all details of the sale are completed and that a clear title passes to the buyer from the seller.
So, what party makes sure the property is worth the purchase price? In comes the appraiser. We provide an unbiased opinion 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 Tierney Appraisals will ensure, you as an interested party, are informed.
Appraisals start with the home inspection
To determine the true status of the property, it's our duty to first conduct a thorough inspection. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they truly are there and are in the condition a typical buyer would expect them to be. To ensure the stated square footage has not been misrepresented and describe the layout of the property, the inspection often requires creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious amenities - or defects - that would have an impact on 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.
Here, the appraiser pulls information on local construction costs, the cost of labor and other factors to calculate how much it would cost to build a property comparable to the one being appraised. This figure commonly sets the maximum on what a property would sell for. It's also the least used predictor of value.
Analyzing Comparable Sales
Appraisers get to know the neighborhoods in which they appraise. They thoroughly understand the value of particular features to the homeowners 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 in question. Using knowledge of the value of 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 portray the features of subject.
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 Tierney Appraisals, we are an authority in knowing the value of real estate features in Beverly and Essex County neighborhoods. The sales comparison approach to value is most often awarded the most consideration when an appraisal is for a home exchange.
Valuation Using the Income Approach
A third method of valuing real estate is sometimes applied when an area has a measurable number of renter occupied properties. In this case, the amount of income the property generates is taken into consideration along with income produced by similar properties to derive the current value.
Arriving at a Value Conclusion
Combining information from all applicable approaches, the appraiser is then ready to document an estimated market value for the subject property. The estimate of value at the bottom of the appraisal report is not necessarily the final sales price even though it is likely the best indication of a property's valuePrices can always 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 used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. At the end of the day, an appraiser from Tierney Appraisals will help you attain the most accurate property value, so you can make wise real estate decisions.