Comprehending Appraisals

Their home's purchase can be the most serious transaction most may ever encounter. Whether it's where you raise your family, a seasonal vacation home or an investment, purchasing real property is a detailed transaction that requires multiple people working in concert to make it all happen.

Most of the participants are quite familiar. The most recognizable face in the transaction is the real estate agent. Next, the bank provides the money necessary to finance the transaction. And the title company sees to it that all requirements of the exchange are completed and that the title is clear to pass from the seller to the buyer.

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 makes sure the value of the property is in line 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 property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from JoAnn Ray Appraisal will ensure, you as an interested party, are informed.

The inspection is where an appraisal starts

To ascertain the true 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 really are present and are in the condition a reasonable buyer would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is correct and illustrating the layout of the property. Most importantly, we look for any obvious amenities - or defects - that would affect the value of the property.

Following the inspection, an appraiser uses 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

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

Paired Sales Analysis

Appraisers are intimately familiar with 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 sales in the vicinity and finds properties which are 'comparable' to the property 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.

  • Say, for example, the comparable has a fireplace and the subject does not, the appraiser may subtract the value of a fireplace from the sales price of the comparable home.
  • However, if the subject has an extra half-bathroom and the comparable does not, the appraiser might add a certain amount to the comparable property.

After all differences have been accounted for, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At JoAnn Ray Appraisal, we are an authority when it comes to knowing the worth of particular items in Waterbury and New Haven County neighborhoods. The sales comparison approach to value is usually given the most weight when an appraisal is for a home exchange.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - we may use a third approach to value. In this case, the amount of income the property generates is taken into consideration along with income produced by neighboring properties to give an indicator of the current value.

Putting It All Together

Combining information from all applicable approaches, the appraiser is then ready to put down an estimated market value for the property at hand. The estimate of value on the appraisal report is not necessarily the final sales price even though it is likely the best indication of what a property is worth. Depending on the individual circumstances of the buyer or seller, their level of urgency or a buyer's desire for that exact property, the closing price of a home can always be driven up or down.But the appraised value is typically employed 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 put the property on the market again. Here's what it all boils down to, an appraiser from JoAnn Ray Appraisal will guarantee you get the most fair and balanced property value, so you can make the most informed real estate decisions.