Comprehending Appraisals

A home purchase can be the most significant financial decision some people will ever make. It doesn't matter if a primary residence, an additional vacation home or an investment, purchasing real property is a detailed transaction that requires multiple parties to pull it all off.

Most people are familiar with the parties taking part in the transaction. The most familiar entity in the transaction is the real estate agent. Then, the lender provides the money necessary to finance the exchange. The title company ensures that all details of the sale are completed and that a clear title transfers to the buyer from the seller.

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 real estate is worth the amount being paid? In comes the appraiser. We provide an unbiased opinion of what a buyer could 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 Scott H. Gallant & Associates Inc. will ensure, you as an interested party, are informed.

Appraisals begin with the inspection

To ascertain the true status of the property, it's our duty to first perform a thorough inspection. We must see features hands on, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really are present and are in the shape a reasonable person would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is correct and conveying the layout of the property. Most importantly, the appraiser identifies any obvious amenities - or defects - that would have an impact on the value of the house.

Following the inspection, an appraiser uses two or three approaches to determining the value of real property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.

Replacement Cost

Here, we analyze information on local building costs, the cost of labor and other elements to determine how much it would cost to build a property comparable to the one being appraised. This estimate commonly sets the maximum on what a property would sell for. It's also the least used predictor of value.

Analyzing Comparable Sales

Appraisers are intimately familiar with the neighborhoods in which they work. They thoroughly understand the value of particular features to the residents of that area. Then, the appraiser looks up recent sales in close proximity to the subject and finds properties which are 'comparable' to the subject at hand. Using knowledge of the value of certain items such as upgraded appliances, extra bathrooms, additional living area, quality of construction, lot size, we add or subtract from each comparable's sales price so that they more accurately match the features of subject property.

  • For example, if the comparable property has a storm shelter and the subject doesn't, the appraiser may deduct the value of a storm shelter 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 a certain 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 Scott H. Gallant & Associates Inc., we are an authority when it comes to knowing the value of particular items in Brooklyn and Kings County neighborhoods. The sales comparison approach to value is usually awarded the most weight when an appraisal is for a home sale.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - the appraiser may use a third way of valuing a house. In this situation, the amount of income the real estate yields is factored in with other rents in the area for comparable properties to determine the current value.

Reconciliation

Analyzing the data from all applicable approaches, the appraiser is then ready to state an estimated market value for the property in question. It is important to note that while this amount is probably the best indication of what a house is worth, it probably will not be the price at which the property closes. Depending on the specific 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.Regardless, 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. The bottom line is, an appraiser from Scott H. Gallant & Associates Inc. will guarantee you discover the most fair and balanced property value, so you can make profitable real estate decisions.