Making Sense of the Appraisal Process

A home purchase can be the most important investment most will ever consider. It doesn't matter if where you raise your family, a seasonal vacation home or a rental fixer upper, purchasing real property is an involved financial transaction that requires multiple people working in concert to make it all happen.

Most of the parties involved are quite familiar. The real estate agent is the most familiar face in the transaction. Then, the lender provides the financial capital necessary to fund the exchange. And ensuring all requirements of the sale are completed and that the title is clear to pass to the buyer from the seller is the title company.

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

So, who makes sure the value of the real estate is consistent with the amount being paid? This is where the appraiser comes in. We provide an unbiased opinion of what a buyer might expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from TOTAL Appraisals, LLC will ensure, you as an interested party, are informed.

Inspecting the subject property

Our first task at TOTAL Appraisals, LLC is to inspect the property to ascertain its true status. We must actually view features, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they indeed exist and are in the condition a reasonable person would expect them to be. To ensure the stated size of the property is accurate and describe the layout of the property, the inspection often includes creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious features - or defects - that would affect the value of the house.

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

Cost Approach

This is where the appraiser analyzes information on local building costs, labor rates and other elements to calculate how much it would cost to replace the property being appraised. This estimate often sets the maximum on what a property would sell for. The cost approach is also the least used method.

Analyzing Comparable Sales

Appraisers are intimately familiar with the communities in which they work. They thoroughly understand the value of particular features to the people of that area. Then, the appraiser researches recent sales in the vicinity and finds properties which are 'comparable' to the home in question. By assigning a dollar value to certain items such as fireplaces, room layout, appliance upgrades, extra 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.

  • Say, for example, the comparable property 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.
  • But, 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.

In the end, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. When it comes to knowing the true worth of features of homes in Grove and Delaware, TOTAL Appraisals, LLC can't be beat. The sales comparison approach to value is usually given the most importance 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 measurable number of renter occupied properties. In this scenario, the amount of income the property produces is taken into consideration along with other rents in the area for comparable properties to derive the current value.

Reconciliation

Analyzing the data from all applicable approaches, the appraiser is then ready to document an estimated market value for the subject property. It is important to note that while the appraised value is probably the most accurate indication of what a house is worth, it may not be the final sales price. Depending on the individual situations 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.Regardless, the appraised value is often used as a guideline for lenders who don't want to loan a buyer more money than they could get back in case they had to put the property on the market again. At the end of the day, an appraiser from TOTAL Appraisals, LLC will help you attain the most fair and balanced property value, so you can make profitable real estate decisions.