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Real Estate Appraisals: A Primer

One's home purchase is the biggest transaction many may ever make. Whether it's where you raise your family, a seasonal vacation home or one of many rentals, the purchase of real property is a complex transaction that requires multiple parties to make it all happen.

To learn more about appraising, click here to see a short video or call us today to talk about your specific property.


It's likely you are familiar with the parties having a role in the transaction. The most recognizable person in the transaction is the real estate agent. Then, the bank provides the financial capital necessary to bankroll the transaction. The title company ensures all requirements of the sale are completed and that a clear title passes to the buyer from the seller is the title company.

So what party makes sure the property is worth the amount being paid?   In comes the appraiser.   We provide an unbiased estimate of what a buyer could expect to pay - or a seller receive - for a parcel of real estate, where both buyer and seller are informed parties. A professional New Jersey licensed appraiser from Robert B. Leger, Appraisal will ensure you as an interested party are informed.

Inspecting the subject property

Our first task at Robert B. Leger, Appraisal is to inspect the property to ascertain its true status. We must see features first hand, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they indeed are there and are in the shape a typical person would expect them to be. To ensure the stated size of the property is accurate and document the layout of the home, the inspection often includes creating a sketch of the floor plan. Most importantly, the appraiser looks for any obvious amenities - or defects - that would affect the value of the property.

Back at the office, an appraiser uses two or three approaches to determining the value of real property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.

Replacement Cost

Here, we use information on local construction costs, the cost of labor and other factors to determine how much it would cost to replace the property being appraised. This figure commonly sets the maximum on what a property would sell for. The cost approach is also the least used method.

Paired Sales Analysis

Appraisers become very familiar with the communities in which they appraise. They innately understand the value of certain features to the people of that area. Then, the appraiser looks up recent sales in the area and finds properties which are 'comparable' to the home being appraised. By assigning a dollar value to certain items such as square footage, additional bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we add or subtract from each comparable's sales price so that they more accurately portray the features of subject property.

  • If, for example, the comparable property has an extra half bath that the subject doesn't, the appraiser may deduct the value of that half bath from the sales price of the comparable.
  • However, if the subject property has an extra half-bathroom and the comparable does not, the appraiser might add an 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 Robert B. Leger, Appraisal, we are experts in knowing the worth of real estate features in Bridgewater and Somerset County neighborhoods. This approach to value is commonly awarded the most consideration when an appraisal is for a real estate purchase.

Valuation Using the Income Approach

A third way of valuing approach to value is sometimes employed when an area has a reasonable number of renter occupied properties. In this scenario, the amount of revenue the property produces is factored in with income produced by similar properties to give an indicator of the current value.

Reconciliation

Examining the data from all applicable approaches, the appraiser is then ready to document an estimated market value for the subject property. The estimate of value on the appraisal report is not necessarily the final sales price even though it is likely the best indication of a property's value There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust an offer or listing price 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 the property is actually worth. Here's what it all boils down to: An appraiser from Robert B. Leger, Appraisal will help you get the most accurate property value, so you can make profitable real estate decisions.