Decoding the Appraisal Process

Buying a home can be the largest transaction many of us will ever consider. Whether it's a primary residence, a second vacation home or a rental fixer upper, purchasing real property is an involved financial transaction that requires multiple parties to make it all happen.

You're probably familiar with the parties having a role in the transaction. The real estate agent is the most recognizable entity in the transaction. Then, the lender provides the money needed to bankroll the deal. And ensuring all requirements of the exchange are completed and that a clear title transfers to the buyer from the seller is the title company.

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So, who makes sure the value of the property is consistent with the purchase price? This is where the appraiser comes in. 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 Coastal Appraisal Assocs. LLC will ensure, you as an interested party, are informed.

Inspecting the subject property

Our first responsibility at Coastal Appraisal Assocs. LLC is to inspect the property to ascertain its true status. We must actually see aspects of the property, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they indeed are present and are in the condition a typical person would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is proper and illustrating the layout of the property. Most importantly, we look for any obvious features - or defects - that would affect the value of the property.

Back at the office, 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, the appraiser gathers information on local construction costs, labor rates and other elements to derive how much it would cost to replace the property being appraised. This value usually sets the upper limit on what a property would sell for. The cost approach is also the least used method.

Paired Sales Analysis

Appraisers can tell you a lot about the communities in which they work. They thoroughly understand the value of certain features to the people of that area. Then, the appraiser looks up recent sales in close proximity to the subject and finds properties which are 'comparable' to the property at hand. Using knowledge of the value of certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or extra storage space, we add or subtract from each comparable's sales price so that they more accurately portray the features of subject.

For example, if the comparable has a fireplace and the subject doesn't, the appraiser may deduct 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.

A valid estimate of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. At Coastal Appraisal Assocs. LLC, we are experts in knowing the worth of particular items in Mount Pleasant and Charleston County neighborhoods. This approach to value is most often awarded the most weight when an appraisal is for a home sale.

Valuation Using the Income Approach

A third way of valuing real estate is sometimes used when a neighborhood has a reasonable number of rental properties. In this scenario, the amount of revenue the property produces 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 applicable approaches, the appraiser is then ready to document an estimated market value for the subject property. The estimate of value at the bottom of 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 an offer or listing price up or down. Regardless, the appraised value is typically used 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 put the property on the market again. The bottom line is, an appraiser from Coastal Appraisal Assocs. LLC will guarantee you get the most accurate property value, so you can make wise real estate decisions.