What Goes Into an Appraisal?

Their home's purchase can be the largest financial decision many people may ever encounter. Whether it's where you raise your family, an additional vacation home or a rental fixer upper, the purchase of 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 face in the transaction is the real estate agent. Then, the bank provides the financial capital necessary to bankroll the transaction. And ensuring all areas of the transaction are completed and that the title is clear to transfer to the buyer from the seller is the title company.

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 real estate is consistent with the purchase price? This is where the appraiser comes in. 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 Tight & Right Real Estate Valuation will ensure, you as an interested party, are informed.

Inspecting the subject property

Our first duty at Tight & Right Real Estate Valuation 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, living areas, etc, to ensure they really exist and are in the shape a typical person would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is proper and illustrating the layout of the property. Most importantly, the appraiser looks for any obvious amenities - or defects - that would affect the value of the property.

Once the site has been inspected, an appraiser uses two or three approaches to determining the value of the property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.

Replacement Cost

This is where we pull information on local building costs, labor rates and other elements to derive how much it would cost to build a property comparable to the one being appraised. This figure often 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 communities in which they work. They innately understand the value of particular features to the residents of that area. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are 'comparable' to the real estate in question. By assigning a dollar value to certain items such as upgraded appliances, extra bathrooms, additional living area, quality of construction, lot size, we adjust the comparable properties so that they are more accurately in line with the features of subject.

  • For example, if the comparable property has a fireplace and the subject does not, the appraiser may subtract the value of a fireplace 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.

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 Tight & Right Real Estate Valuation, we are an authority in knowing the worth of particular items in Princeton and Union County neighborhoods. The sales comparison approach to value is commonly awarded 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 - the appraiser may use a third method of valuing a property. In this scenario, the amount of income the real estate yields is taken into consideration along with other rents in the area for comparable properties to derive the current value.

Coming Up With The Final Value

Combining information from all approaches, the appraiser is then ready to state an estimated market value for the property at hand. It is important to note that while the appraised value is probably the strongest indication of what a house is worth, it probably will not be the price at which the property closes. Depending on the individual situations 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 the property is actually worth. It all comes down to this, an appraiser from Tight & Right Real Estate Valuation will guarantee you get the most accurate property value, so you can make the most informed real estate decisions.