Appraisal Help Info

What is an appraisal?

Buying real estate can be the most significant transaction many could ever encounter. It doesn’t matter if it’s where you raise your family, a seasonal vacation home or a rental fixer upper, the purchase of real property is an involved financial transaction that requires multiple parties to make it all happen.

You’re likely to be familiar with the parties having a role in the transaction. The real estate agent is the most recognizable person in the transaction. Then, the lender provides the financial capital necessary to bankroll the transaction. The title company ensures that all aspects of the exchange are completed and that the title is clear to transfer to the buyer from the seller.

So who’s responsible for making sure the property is consistent with the amount being paid?   This is where you meet the appraiser.   We provide an unbiased estimate of what a buyer could expect to pay – or a seller receive – for a property, where both buyer and seller are informed parties. A professional licensed appraiser from Home Appraisals, Inc. will ensure you as an interested party are informed.

The inspection is where an appraisal starts

Our first task at Home Appraisals, Inc. is to inspect the property to ascertain its true status. We must actually view aspects of the property, such as the number of bedrooms and bathrooms, the location, living areas, etc., to ensure they really are present and are in the condition a typical person 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 house.

Following the inspection, an appraiser employs two or three approaches when determining the value of the property: paired sales analysis and, in the case of a rental property, an income approach.

Cost Approach
This is where we gather information on local construction costs, labor rates and other elements to calculate how much it would cost to construct a property similar to the one being appraised. This value often sets the maximum on what a property would sell for. It’s also the least used predictor of value.

Sales Comparison
Appraisers get to know the subdivisions in which they appraise. We innately understand the value of particular features to the people of that area. Then, the appraiser researches recent transactions in the vicinity and finds properties which are ‘comparable’ to the subject in question. Using knowledge of the value of certain items such as upgraded appliances, extra bathrooms, an additional living area, quality of construction, lot size, we adjust the comparable properties so that they more accurately match the features of subject property.

• For example, if the comparable has a storm shelter and the subject doesn’t, the appraiser may deduct the value of a storm shelter from the sales price of the comparable home.

• If the subject has an extra half-bathroom and the comparable does not, the appraiser might add a certain amount to the comparable property.

The sales comparison approach to value is commonly given the most importance when an appraisal is for a home purchase.

Valuation Using the Income Approach
In the case of income producing properties – rental houses for example – we may use a third way of valuing a property. In this case, the amount of income the real estate produces is factored in with income produced by neighboring properties to derive the current value.

The Bottom Line
Combining information from all approaches, the appraiser is then ready to state an estimated market value for the property at hand. It is important to note that while this amount is probably the most accurate indication of what a property 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 often 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. At the end of the day: An appraiser from Home Appraisals, Inc. will help you attain the most fair and balanced property value, so you can make profitable real estate decisions.