Understanding Appraisals

Buying a house can be the most serious financial decision most people will ever encounter. It doesn't matter if where you raise your family, an additional vacation home or a rental fixer upper, the purchase of real property is a complex financial transaction that requires multiple parties to make it all happen.

It's likely you are familiar with the parties taking part in the transaction. The real estate agent is the most recognizable person in the exchange. Then, the bank provides the money needed to finance the exchange. The title company sees to it that all aspects of the exchange are completed and that a clear title transfers 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, who makes sure the value of the property is in line with the purchase price? This is where the appraiser comes in. 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 NCA Appraisal Services will ensure, you as an interested party, are informed.

Appraisals begin with the property inspection

Our first task at NCA Appraisal Services is to inspect the property to ascertain its true status. We must physically see aspects of the property, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really are there and are in the shape a reasonable buyer would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is proper and conveying the layout of the property. Most importantly, we identify any obvious features - or defects - that would have an impact on the value of the property.

Once the site has been inspected, 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.

Cost Approach

Here, the appraiser analyzes information on local building costs, labor rates and other factors to determine how much it would cost to construct a property comparable to the one being appraised. This value commonly sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.

Paired Sales Analysis

Appraisers get to know the neighborhoods in which they appraise. They thoroughly understand the value of specific features to the people of that area. Then, the appraiser researches recent sales in the vicinity and finds properties which are 'comparable' to the property at hand. By assigning a dollar value to certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or additional storage space, 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 extra half bath that the subject doesn't, the appraiser may subtract the value of that half bath from the sales price of the comparable.
  • 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.

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 NCA Appraisal Services, we are an authority when it comes to knowing the worth of real estate features in Melbourne and Izard County neighborhoods. This approach to value is typically given the most consideration when an appraisal is for a home sale.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - we may use an additional way of valuing a house. In this case, the amount of income the property produces is factored in with income produced by comparable properties to give an indicator of the current value.

Coming Up With The Final Value

Combining information from all applicable approaches, the appraiser is then ready to put down an estimated market value for the property at hand. Note: While this amount is probably the best indication of what a house is worth, it may not be the price at which the property closes. There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust the final price up or down. 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. At the end of the day, an appraiser from NCA Appraisal Services will guarantee you discover the most accurate property value, so you can make the most informed real estate decisions.