Residential Real Estate
Jul 5, 2023

The Importance of Real Estate Appraisals

Sponsored Content provided by Steve Mitchell - 2023 President, Cape Fear REALTORS®

Most people have experience with appraisers through the financing process, either when buying or refinancing a property. However, real estate appraisers can offer support with their extensive knowledge of the transaction process.

Appraisers can assist clients with property tax appeals. Property taxes represent one of the largest expenses associated with a property.  A reduction in the property tax bill of an income-producing property has an immediate impact on the net operating income (NOI), which directly increases a property’s value.  This is often overlooked by property owners. 

Property owners who occupy their buildings are also aware of the property tax burden.  A reduction of these property taxes has a positive impact on a company’s cash flow. Some appraisers have been involved in numerous property tax appeal cases, several exceeding $100 million in value. Real estate appraisers are often hired to review property tax for counties and property owners.

Another way that appraisers assist their clients is through eminent domain.  When the North Carolina Department of Transportation, a utility company, or a municipality acquires land through eminent domain, it is in everyone’s best interest to ensure the property owner is adequately compensated. 

The property owner only has one opportunity to ensure he/she is appropriately compensated for the property, so the right appraiser and legal counsel are very important. Not all appraisers are experienced in seeing the future implications of a condemnation proceeding or how the property will be impacted, so hiring the right appraiser is a vital part of the process. Appraisers provide these services to municipalities, utility companies, state owners, and property owners.

When appraisers estimate property values for this purpose, the bank (or lender) is usually the client. While most property owners (borrowers) want the highest value for their property when it is being appraised, the role of the appraiser is to provide the most realistic value opinion.  

If the appraised value is too low, the owner’s borrowing capacity may be unnecessarily limited. If the value is too high, the borrower may become over-leveraged, leading to potential problems down the road. A realistic appraisal provides the lender and borrower with the best information to make informed decisions.

Clients often hire appraisers to assess a property before they make an offer or list a property for sale. If an appraisal costs $3,000, and it keeps a buyer from over-paying for a property or buying an over-priced property, that could be the best $3,000 money can buy. On the flip side, an appraisal could keep a property owner from listing a property for sale at a price that is too low. In both cases, the appraisal fee, often the reason people balk at ordering one, is money well spent.

For more insights on the nuances of purchasing a home or to connect with a local agent who has experience writing appraisal contingencies, visit CapeFear.REALTOR or call 910-762-7400. 

Steve Mitchell is the 2023 president of Cape Fear REALTORS®, an organization with nearly 3,500 members who serve as the region’s Voice of Real Estate. Cape Fear REALTORS®, through advocacy, education, and community involvement, support efforts to protect the rights of property owners, promote the availability of housing, and provide resources to guarantee every individual has the right to share in the “American Dream.”  For further information on this topic and the association, please visit www.capefear.realtor or contact the Cape Fear REALTORS® at 910-762-7400.

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