An Overview of the Appraisal Process

A home purchase can be the most significant financial decision some people might ever consider. Whether it's where you raise your family, a second vacation property or one of many rentals, purchasing real property is a detailed financial transaction that requires multiple parties to pull it all off.

It's likely you are familiar with the parties having a role in the transaction. The most familiar face in the exchange is the real estate agent. Next, the bank provides the financial capital required to finance the deal. The title company ensures that all requirements of the sale are completed and that the title is clear to transfer from the seller to the purchaser.

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 real estate is worth the amount being paid? This is where you meet the appraiser. We provide an unbiased opinion 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 Michael Cenatiempo will ensure, you as an interested party, are informed.

Appraisals begin with the home inspection

Our first duty at Michael Cenatiempo is to inspect the property to determine its true status. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, and so on, 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 accurate and illustrating 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 property.

Next, after the inspection, we use 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.

Cost Approach

Here, we gather information on local construction costs, the cost of labor and other elements to determine how much it would cost to construct a property nearly identical to the one being appraised. This estimate usually sets the maximum on what a property would sell for. The cost approach is also the least used method.

Analyzing Comparable Sales

Appraisers become very familiar with the communities in which they appraise. They thoroughly understand the value of particular features to the people of that area. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are 'comparable' to the home 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 add or subtract from each comparable's sales price so that they more accurately portray the features of subject property.

  • For example, if the comparable 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.
  • However, if the subject property 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 Michael Cenatiempo, we are an authority in knowing the worth of particular items in Old Bridge and Middlesex County neighborhoods. This approach to value is most often awarded the most consideration when an appraisal is for a real estate sale.

Valuation Using the Income Approach

A third way of valuing approach to value is sometimes employed when an area has a reasonable number of rental properties. In this situation, the amount of revenue the real estate yields is taken into consideration along with other rents in the area for comparable properties to give an indicator of the current value.

Reconciliation

Combining information from all applicable approaches, the appraiser is then ready to state an estimated market value for the subject property. It is important to note that 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. 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 often employed as a guideline for lenders who don't want to loan a buyer more money than they could get back in the event they had to sell the property again. It all comes down to this, an appraiser from Michael Cenatiempo will help you attain the most fair and balanced property value, so you can make the most informed real estate decisions.