Comprehending Appraisals

A home purchase can be the most serious investment some could ever consider. Whether it's a main residence, a second vacation property or an investment, purchasing real property is an involved 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 real estate agent is the most recognizable entity in the exchange. Then, the lender provides the financial capital needed to finance the deal. And ensuring all requirements of the transaction are completed and that the title is clear to pass 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's responsible for making sure the property is worth the amount being paid? In comes 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 licensed, certified, professional appraiser from Tierney Appraisals will ensure, you as an interested party, are informed.

Appraisals begin with the home inspection

Our first duty at Tierney Appraisals is to inspect the property to ascertain its true status. We must see features 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 reasonable buyer would expect them to be. To make sure the stated size of the property has not been misrepresented and convey the layout of the house, the inspection often requires creating a sketch of the floorplan. Most importantly, we identify any obvious features - or defects - that would affect the value of the house.

After the inspection, we use two or three approaches to determining the value of real property: paired sales analysis and, in the case of a rental property, an income approach.

Replacement Cost

Here, the appraiser pulls information on local construction costs, the cost of labor and other factors to derive how much it would cost to replace the property being appraised. This figure often sets the upper limit on what a property would sell for. The cost approach is also the least used method.

Sales Comparison

Appraisers are intimately familiar with the communities in which they work. They thoroughly understand the value of specific 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 real estate being appraised. Using knowledge of the value of certain items such as square footage, additional bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we adjust the comparable properties so that they are more accurately in line with the features of subject.

  • Say, for example, the comparable has an extra half bath that the subject does not, the appraiser may subtract the value of that half bath from the sales price of the comparable.
  • However, 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 Tierney Appraisals, we are an authority in knowing the value of particular items in Beverly and Essex County neighborhoods. The sales comparison approach to value is most often given the most consideration when an appraisal is for a real estate exchange.

Valuation Using the Income Approach

A third method of valuing real estate is sometimes applied when a neighborhood has a reasonable number of rental properties. In this case, the amount of revenue the real estate generates is factored in with other rents in the area for comparable properties to determine the current value.

Reconciliation

Combining information from all approaches, the appraiser is then ready to stipulate an estimated market value for the property at hand. Note: While the appraised value is probably the most accurate indication of what a house is worth, it probably will not be the price at which the property closes. Prices 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 employed 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 Tierney Appraisals will guarantee you discover the most accurate property value, so you can make profitable real estate decisions.