Wilmington and Burgaw Area Real Estate News

One of the most important parts of financing and purchasing a home is the appraisal. The appraisal is conducted by an unbiased third-party, a state licensed individual, and tells the lender if the offer on the home is too low, too high, or just right. The appraiser does not determine the value of the home. Instead, the appraiser collects all the appropriate data and creates a report that shows the value of the home. In other words, the market determines the value of the home. The appraisal process can be pretty vague, so here is a short description of the steps an appraiser takes to come to the conclusion of what a home is worth.

Step 1. The appraiser identifies the home, the type of property, and what sources they will need to utilize to gather all the data they need.

Step 2. They gather and verify all the data about the home that they need, including visiting the home to visually review the condition of the home. The type of data collected is determined by the approach the appraiser chooses to take, but often includes property features, home improvements, comparable sales, construction costs, etc.

Step 3. The appraiser determines the property’s highest and best use by taking into account the current use of the property, the current use of comparable properties, and future potential use.

Step 4. They determine the value of the land alone. Location, neighborhood, construction projects, and comparable sales affect this price.

Step 5. The appraiser analyzes all the data using different approaches, including The Sales Comparison Approach, The Cost Approach, and The Income Capitalization Approach. This provides multiple estimates that are then reconciled to give the appraiser a solid number to go by.

Step 6. As the last step, the appraiser puts the findings into a report. This report should identify the property, the value being estimated, its highest and best use, an overview of the steps taken to gather the data, a description of the data used, an explanation for the appraiser’s opinion, and a signed certificate per the Uniform Standards of Professional Appraisal Practice (USPAP) guidelines.

Depending on the lender, the appraisal is good for up to 60 days and is usually paid for at closing by the buyer.