Every home loan requires an appraisal. An appraisal shows the real value of a property at the time of purchase and helps to establish the Loan To Value (LTV) ratio of the loan. LTV plays a big part in the loan as it relates to the mortgage rate, credit rating needed, and amount of private mortgage insurance or PMI.
Here is How Our Property Appraisal Process Works
(1) Inspecting the Subject Property
To determine an accurate status of the property, it’s our responsibility to first conduct a thorough inspection. We must physically see features, 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 buyer would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is correct and illustrating the layout of the property. Most importantly, the appraiser identifies any obvious amenities – or defects – that would affect the value of the property.
(2) Analyzing Comparable Sales
Appraisers become very familiar with the subdivisions in which they work. We thoroughly 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 in question. By assigning a dollar value to certain items such as upgraded appliances, extra bathrooms, an additional living area, quality of construction, lot size, we add or subtract from each comparable sales price so that they more accurately portray the features of subject 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. The sales comparison approach to value is most often awarded the most consideration when an appraisal is for a real estate exchange.
(3) Valuation Using the Income Approach
A third method of valuing approach to value is sometimes employed when a neighborhood has a measurable number of renter occupied properties. In this scenario, the amount of income the property produces is taken into consideration along with other rents in the area for comparable properties to give an indicator of the current value.
(4) 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 property at hand. It is important to note that while the appraised value is probably the best indication of what a house would sell for in an open market, 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 typically used as a guideline for lenders who don’t want to loan a buyer more money than the property would likely sell for in an open marketplace. What you can expect from Pinelands Appraisal, Inc. are unbiased, accurate and well supported valuations in order for you to make the most well informed real estate decisions.