Making Sense of the Appraisal Process

A home purchase can be the biggest transaction many may ever consider. It doesn't matter if a main residence, a seasonal vacation property or one of many rentals, purchasing real property is a detailed financial transaction that requires multiple people working in concert to make it all happen.

Practically all the parties participating are very familiar. The real estate agent is the most familiar person in the transaction. Next, the lender provides the financial capital needed to bankroll the deal. And the title company sees to it that all requirements of the transaction are completed and that the title is clear to transfer to the buyer from the seller.

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So, what party is responsible for making sure the value of the real estate is consistent with the amount being paid? This is where you meet the appraiser. We provide an unbiased estimate 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 Lake Norman Appraisal Company will ensure, you as an interested party, are informed.

Inspecting the subject property

Our first task at Lake Norman Appraisal Company is to inspect the property to ascertain its true status. We must actually see features, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed exist and are in the shape a reasonable buyer would expect them to be. To ensure the stated square footage is accurate and document the layout of the property, the inspection often includes creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious features - or defects - that would affect the value of the house.

Once the site has been inspected, we use 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

Here, we use information on local building costs, labor rates and other elements to derive how much it would cost to replace the property being appraised. This figure commonly sets the upper limit on what a property would sell for. The cost approach is also the least used method.

Sales Comparison

Appraisers get to know the subdivisions in which they work. They innately understand the value of specific features to the homeowners 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 at hand. Using knowledge of the value of 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 match the features of subject.

  • Say, for example, the comparable property has an irrigation system and the subject does not, the appraiser may deduct the value of an irrigation system from the sales price of the comparable home.
  • However, 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 could sell for can only be determined once all differences between the comps and the subject have been evaluated. At Lake Norman Appraisal Company, we are an authority in knowing the value of real estate features in Cornelius and Mecklenburg County neighborhoods. This approach to value is most often given the most importance when an appraisal is for a home exchange.

Valuation Using the Income Approach

A third way of valuing real estate is sometimes applied when a neighborhood has a reasonable number of rental properties. In this scenario, the amount of income the property generates is taken into consideration along with income produced by comparable properties to derive the current value.

Reconciliation

Analyzing the data from all applicable approaches, the appraiser is then ready to put down an estimated market value for the property in question. Note: While this amount is probably the strongest indication of what a house is worth, it may not be the final sales price. Depending on the specific 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.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. The bottom line is, an appraiser from Lake Norman Appraisal Company will help you discover the most fair and balanced property value, so you can make wise real estate decisions.