What Goes Into an Appraisal?

Purchasing real estate can be the most significant investment many people may ever consider. Whether it's where you raise your family, a seasonal vacation property or a rental fixer upper, purchasing real property is a complex financial transaction that requires multiple parties to pull it all off.

It's likely you are familiar with the parties taking part in the transaction. The real estate agent is the most known entity in the exchange. Then, the bank provides the money required to fund the transaction. And the title company makes sure that all details of the transaction are completed and that a clear title passes from the seller to the buyer.

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 makes sure the property is worth the amount being paid? This is where you meet the appraiser. We provide an unbiased opinion 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 TR Northern Properties Realty will ensure, you as an interested party, are informed.

The inspection is where an appraisal begins

Our first task at TR Northern Properties Realty is to inspect the property to determine its true status. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they indeed are there and are in the condition a reasonable person would expect them to be. To make sure the stated size of the property is accurate and convey the layout of the home, the inspection often requires creating a sketch of the floorplan. Most importantly, we look for any obvious amenities - or defects - that would have an impact on the value of the property.

Back at the office, an appraiser uses two or three approaches to determining the value of real property: sales comparison and, in the case of a rental property, an income approach.

Cost Approach

This is where we pull information on local building costs, the cost of labor and other elements to derive how much it would cost to replace the property being appraised. This estimate often sets the maximum on what a property would sell for. It's also the least used method.

Sales Comparison

Appraisers become very familiar with the communities in which they appraise. They thoroughly understand the value of specific features to the homeowners of that area. Then, the appraiser researches recent sales in the vicinity and finds properties which are 'comparable' to the real estate in question. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, we add or subtract from each comparable's sales price so that they more accurately match the features of subject property.

For example, if the comparable property has an irrigation system and the subject does not, the appraiser may subtract the value of an irrigation system 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.

Once all necessary adjustments have been made, 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 value of features of homes in virginia and Saint Louis, TR Northern Properties Realty can't be beat. The sales comparison approach to value is most often awarded the most weight when an appraisal is for a home purchase.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - the appraiser may use an additional way of valuing a property. In this situation, the amount of income the real estate produces is taken into consideration along with income produced by nearby properties to determine the current value.

Coming Up With The Final Value

Combining information from all approaches, the appraiser is then ready to put down an estimated market value for the property at hand. The estimate of value on the appraisal report is not necessarily what's being paid for the property even though it is likely the best indication of a property's valueIt's not uncommon for prices to be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. But the appraised value is typically employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. At the end of the day, an appraiser from TR Northern Properties Realty will help you attain the most fair and balanced property value, so you can make the most informed real estate decisions.