A Description of the Appraisal Process

Purchasing real estate can be the most serious transaction most people may ever consider. It doesn't matter if where you raise your family, a seasonal vacation home or one of many rentals, purchasing real property is a complex transaction that requires multiple people working in concert to see it through.

Most of the parties participating are quite familiar. The real estate agent is the most familiar person in the transaction. Next, the mortgage company provides the financial capital required to fund the exchange. The title company ensures that all areas of the transaction are completed and that the title is clear to transfer to the buyer from the seller.

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

So, who's responsible for making sure the value of the real estate is consistent with the amount being paid? In comes 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 licensed, certified, professional appraiser from Priority Appraisal will ensure, you as an interested party, are informed.

Appraisals start with the property inspection

Our first responsibility at Priority Appraisal is to inspect the property to determine its true status. We must see features hands on, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly exist and are in the condition a typical person would expect them to be. To make sure the stated square footage has not been misrepresented and document the layout of the home, the inspection often includes creating a sketch of the floorplan. Most importantly, we identify any obvious amenities - or defects - that would affect the value of the property.

Following the inspection, we use two or three approaches to determining the value of real property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.

Replacement Cost

Here, we analyze information on local building costs, the cost of labor and other factors to ascertain how much it would cost to replace the property 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 neighborhoods in which they appraise. They thoroughly understand the value of particular features to the people of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the home in question. By assigning a dollar value to certain items such as square footage, additional bathrooms, hardwood floors, fireplaces or view lots (just to name a few), 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 does not, the appraiser may subtract the value of a fireplace from the sales price of the comparable.
  • However, if the subject has an extra half-bathroom and the comparable does not, the appraiser might add a certain amount to the comparable property.

An opinion of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. When it comes to associating a value with features of homes in White House and Sumner, Priority Appraisal can't be beat. This approach to value is commonly awarded the most weight when an appraisal is for a real estate sale.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - we may use a third method of valuing real estate. In this case, the amount of revenue the real estate produces is taken into consideration along with income produced by similar properties to determine the current value.

The Bottom Line

Combining information from all applicable approaches, the appraiser is then ready to state an estimated market value for the subject property. It is important to note that while this amount is probably the strongest indication of what a house is worth, it probably will not be the final sales price. There are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust the final price up or down. Regardless, the appraised value is often employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. Here's what it all boils down to, an appraiser from Priority Appraisal will help you discover the most fair and balanced property value, so you can make profitable real estate decisions.