What Is an Appraisal?

A home purchase can be the largest financial decision most could ever consider. Whether it's where you raise your family, a second vacation home or a rental fixer upper, purchasing real property is a detailed financial transaction that requires multiple people working in concert to make it all happen.

Most people are familiar with the parties taking part in the transaction. The real estate agent is the most familiar face in the exchange. Next, the mortgage company provides the money required to fund the deal. And the title company makes sure that all areas of the sale are completed and that a clear title passes 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, what party is responsible for making sure the value of the real estate is in line with the amount being paid? In comes the appraiser. 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 Ru Appraisals, LLC will ensure, you as an interested party, are informed.

Inspecting the subject property

Our first task at Ru Appraisals, LLC is to inspect the property to ascertain its true status. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed are present and are in the condition a reasonable buyer would expect them to be. To make sure the stated square footage is accurate and document the layout of the property, the inspection often entails creating a sketch of the floorplan. Most importantly, we look for any obvious features - or defects - that would affect the value of the house.

Next, after 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 pull information on local construction costs, the cost of labor and other elements to derive how much it would cost to build 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 can tell you a lot about the subdivisions in which they work. They thoroughly understand the value of particular features to the people of that area. Then, the appraiser researches recent transactions in the area and finds properties which are 'comparable' to the subject in question. By assigning a dollar value to certain items such as fireplaces, room layout, appliance upgrades, extra bathrooms or bedrooms, or quality of construction, we adjust the comparable properties so that they more accurately portray the features of subject property.

  • Say, for example, the comparable property has a fireplace and the subject does not, the appraiser may deduct the value of a fireplace from the sales price of the comparable home.
  • But, 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 Ru Appraisals, LLC, we are an authority in knowing the worth of particular items in Whiting and Ocean County neighborhoods. This approach to value is typically given the most importance 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 a neighborhood has a measurable number of rental properties. In this situation, the amount of revenue the real estate produces is taken into consideration along with other rents in the area for comparable properties to derive the current value.

Reconciliation

Examining the data from all approaches, the appraiser is then ready to put down an estimated market value for the subject property. Note: While the appraised value is probably the most reliable 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 the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust the final price up or down. Regardless, the appraised value is often used 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 Ru Appraisals, LLC will help you discover the most fair and balanced property value, so you can make the most informed real estate decisions.