Understanding the Appraisal Process

Buying a house is the most important transaction some of us will ever encounter. Whether it's a main residence, a seasonal vacation property or one of many rentals, the purchase of real property is a detailed transaction that requires multiple parties to see it through.


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Most of the participants are quite familiar. The most recognizable person in the transaction is the real estate agent. Then, the lender provides the money necessary to fund the transaction. Ensuring all aspects of the exchange are completed and that the title is clear to transfer from the seller to the purchaser is the title company.

So what party is responsible for making sure the value of the real estate is consistent with the purchase price? In comes the appraiser. We provide an unbiased estimate of what a buyer might expect to pay - or a seller receive - for a property, where both buyer and seller are informed parties. A professional New Jersey licensed appraiser from The Welter Appraisal Group will ensure you as an interested party are informed.

Appraisals start with the home inspection

To determine an accurate status of the property, it's our responsibility to first conduct a thorough inspection. We must actually see features, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really exist and are in the condition a typical buyer would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is proper and conveying the layout of the property. Most importantly, we look for any obvious features - or defects - that would have an impact on the value of the house.

Once the site has been inspected, we use two or three approaches when 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

This is where the appraiser gathers information on local construction costs, labor rates and other factors to determine how much it would cost to build a property nearly identical to the one being appraised. This value usually sets the upper limit on what a property would sell for. It's also the least used method.

Analyzing Comparable Sales

Appraisers get to know the subdivisions in which they appraise. We innately understand the value of particular features to the residents 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. By assigning a dollar value to certain items such as fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject.

If, for example, 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 home.
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.

When it comes to valuing features of homes in Oakhurst and Monmouth, The Welter Appraisal Group can't be beat. The sales comparison approach to value is typically given the most weight when an appraisal is for a home sale.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - the appraiser may use an additional method of valuing a property. In this situation, the amount of income the real estate yields is factored in with other rents in the area for comparable properties to derive the current value.

Coming Up With the Final Value

Combining information from all approaches, the appraiser is then ready to document an estimated market value for the property in question. It is important to note that while the appraised value is probably the most reliable indication of what a property would sell for in an open market, it may not be the final sales price. 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 typically employed 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. It all comes down to this: An appraiser from The Welter Appraisal Group will guarantee you attain the most accurate property value, so you can make wise real estate decisions.