Real Property Appraisals: A Primer

Buying real estate can be the largest transaction some might ever make. It doesn't matter if where you raise your family, a second vacation property or a rental fixer upper, purchasing real property is an involved financial transaction that requires multiple people working in concert to see it through.

Most of the participants are quite familiar. The real estate agent is the most recognizable face in the exchange. Then, the mortgage company provides the financial capital necessary to finance the deal. The title company ensures that all aspects of the transaction are completed and that the title is clear to transfer 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 makes sure the property 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 property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from BK Appraisals LLC will ensure, you as an interested party, are informed.

Appraisals start with the property inspection

Our first responsibility at BK Appraisals LLC is to inspect the property to ascertain its true status. We must physically view features, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they truly are there and are in the condition a typical person would expect them to be. To ensure the stated square footage has not been misrepresented and convey the layout of the home, the inspection often includes creating a sketch of the floorplan. Most importantly, we identify any obvious features - or defects - that would affect the value of the property.

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

Replacement Cost

Here, the appraiser analyzes information on local construction costs, the cost of labor and other factors to derive how much it would cost to construct a property nearly identical to the one being appraised. This estimate commonly sets the maximum on what a property would sell for. It's also the least used method.

Analyzing Comparable Sales

Appraisers can tell you a lot about the subdivisions in which they appraise. They innately understand the value of specific features to the homeowners 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 square footage, extra bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we adjust the comparable properties so that they are more accurately in line with the features of subject.

For example, if the comparable has an extra half bath that the subject does not, the appraiser may deduct the value of that half bath from the sales price of the comparable home.
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.

In the end, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. When it comes to knowing the true value of features of homes in Marlton and Burlington, BK Appraisals LLC is your local authority. This approach to value is typically given the most weight when an appraisal is for a home purchase.

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 real estate. In this situation, the amount of revenue the real estate yields is factored in with other rents in the area for comparable properties to give an indicator of the current value.

Coming Up With The Final Value

Combining information from all approaches, the appraiser is then ready to stipulate an estimated market value for the property at hand. The estimate of value on the appraisal report is not always the final sales price even though it is likely the best indication of a property's valueThere are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust the final price up or down. But the appraised value is typically used 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 BK Appraisals LLC will guarantee you get the most accurate property value, so you can make wise real estate decisions.