What Goes Into an Appraisal?

A home purchase can be the largest financial decision most of us might ever make. Whether it's a primary residence, a second vacation home or an investment, the purchase of real property is an involved financial transaction that requires multiple parties to make it all happen.

You're probably familiar with the parties taking part in the transaction. The most recognizable person in the exchange is the real estate agent. Then, the mortgage company provides the financial capital necessary to fund the transaction. And ensuring all requirements of the exchange are completed and that a clear title passes from the seller to the purchaser 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, what party is responsible for making sure the value of the real estate is in line with the amount being paid? In comes the appraiser. We provide an unbiased opinion of what a buyer might expect to pay — or a seller receive — for a parcel of real estate, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Widener Appraisal Service will ensure, you as an interested party, are informed.

The inspection is where an appraisal starts

To determine the true status of the property, it's our duty to first perform a thorough inspection. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they really are present and are in the shape a typical buyer would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is correct and conveying the layout of the property. Most importantly, the appraiser looks 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 to determining the value of real property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.

Replacement Cost

This is where we gather information on local construction costs, the cost of labor and other factors to ascertain how much it would cost to replace the property being appraised. This value usually sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.

Analyzing Comparable Sales

Appraisers get to know the subdivisions in which they appraise. They innately understand the value of certain features to the homeowners of that area. Then, the appraiser looks up recent sales in the area and finds properties which are 'comparable' to the property at hand. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, extra bathrooms or bedrooms, or quality of construction, we adjust the comparable properties so that they are more accurately in line with the features of subject.

  • If, for example, the comparable has a fireplace and the subject does not, 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.

A true estimate 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 valuing features of homes in Harrogate and Claiborne, Widener Appraisal Service is your local authority. The sales comparison approach to value is typically awarded the most consideration when an appraisal is for a home sale.

Valuation Using the Income Approach

A third way of valuing real estate is sometimes used when an area has a reasonable number of rental properties. In this situation, the amount of income the real estate yields is taken into consideration along with income produced by comparable properties to give an indicator of the current value.

Reconciliation

Examining the data from all approaches, the appraiser is then ready to put down an estimated market value for the property at hand. The estimate of value at the bottom of the appraisal report is not always the final sales price even though it is likely the best indication of what a property is worth. 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 is actually worth. It all comes down to this, an appraiser from Widener Appraisal Service will guarantee you discover the most accurate property value, so you can make wise real estate decisions.