What Goes Into an Appraisal?

A home purchase is the largest transaction many may ever make. It doesn't matter if a main residence, a seasonal vacation property or one of many rentals, the purchase of real property is an involved financial transaction that requires multiple people working in concert to see it through.

It's likely you are familiar with the parties having a role in the transaction. The real estate agent is the most recognizable entity in the exchange. Next, the mortgage company provides the financial capital necessary to finance the transaction. And ensuring all areas of the sale are completed and that the title is clear to pass from the seller to the buyer 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's responsible for making sure the real estate is worth the purchase price? This is where you meet the appraiser. We provide an unbiased estimate 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 All Pro Appraisals will ensure, you as an interested party, are informed.

The inspection is where an appraisal begins

Our first responsibility at All Pro Appraisals is to inspect the property to ascertain its true status. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they truly exist and are in the shape a reasonable person would expect them to be. To ensure the stated square footage has not been misrepresented and document the layout of the house, the inspection often requires creating a sketch of the floorplan. Most importantly, we look for any obvious features - or defects - that would affect 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

Here, we analyze information on local construction costs, the cost of labor and other elements to calculate how much it would cost to replace the property being appraised. This estimate usually sets the upper limit on what a property would sell for. It's also the least used method.

Paired Sales Analysis

Appraisers can tell you a lot about the communities in which they appraise. They innately understand the value of certain features to the homeowners of that area. Then, the appraiser looks up recent transactions in the area and finds properties which are 'comparable' to the home at hand. By assigning a dollar value to certain items such as upgraded appliances, additional bathrooms, additional living area, quality of construction, lot size, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject property.

  • If, 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.

An opinion of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. At All Pro Appraisals, we are experts when it comes to knowing the worth of particular items in Versailles and Woodford County neighborhoods. This approach to value is typically awarded 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 - the appraiser may use an additional way of valuing a house. In this case, the amount of income the property generates is factored in with income produced by nearby properties to derive the current value.

Reconciliation

Combining information from all approaches, the appraiser is then ready to stipulate an estimated market value for the property in question. The estimate of value at the bottom of 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 valueDepending on the specific 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 typically employed as a guideline for lenders who don't want to loan a buyer more money than they could recover in the event they had to sell the property again. The bottom line is, an appraiser from All Pro Appraisals will guarantee you discover the most fair and balanced property value, so you can make the most informed real estate decisions.