What Goes Into an Appraisal?

A home purchase can be the largest investment some people could ever consider. Whether it's a primary residence, a second vacation property or a rental fixer upper, the purchase of real property is a detailed financial transaction that requires multiple parties to make it all happen.

The majority of the participants are very familiar. The most recognizable face in the transaction is the real estate agent. Then, the bank provides the financial capital necessary to bankroll the transaction. The title company sees to it that all details of the transaction are completed and that the title is clear to pass from the seller to the buyer.

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So, who makes sure the value of the property is in line with 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 Coastline Residential Appraisers will ensure, you as an interested party, are informed.

Appraisals begin with the home inspection

Our first duty at Coastline Residential Appraisers is to inspect the property to determine its true status. 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 exist and are in the shape a typical person would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is accurate and conveying the layout of the property. Most importantly, the appraiser looks for any obvious features - or defects - that would affect the value of the property.

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

Replacement Cost

This is where we gather information on local building costs, labor rates and other elements to derive how much it would cost to replace the property being appraised. This value often sets the upper limit on what a property would sell for. The cost approach is also the least used method.

Paired Sales Analysis

Appraisers are intimately familiar with the subdivisions in which they appraise. They innately understand the value of certain features to the people of that area. Then, the appraiser researches recent sales in the neighborhood and finds properties which are 'comparable' to the real estate being appraised. By assigning a dollar value to certain items such as square footage, additional 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 more accurately portray the features of subject.

For example, if the comparable has an irrigation system and the subject doesn't, the appraiser may subtract the value of an irrigation system from the sales price of the comparable.
If the subject has an extra half-bathroom and the comparable does not, the appraiser might add a certain amount 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 Coastline Residential Appraisers, we are an authority in knowing the worth of real estate features in Carolina Beach and New Hanover County neighborhoods. This approach to value is usually awarded the most weight when an appraisal is for a real estate exchange.

Valuation Using the Income Approach

A third way of valuing real estate is sometimes used when an area has a measurable number of rental properties. In this case, the amount of income the real estate generates is taken into consideration along with income produced by nearby properties to derive the current value.

Arriving at a Value Conclusion

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 this amount is probably the strongest 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'. But the appraised value is typically employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. Here's what it all boils down to, an appraiser from Coastline Residential Appraisers will guarantee you get the most fair and balanced property value, so you can make profitable real estate decisions.