Comprehending Appraisals

Acquiring a house can be the most significant transaction many of us may ever encounter. It doesn't matter if a main residence, a second vacation home or one of many rentals, purchasing real property is a detailed financial transaction that requires multiple people working in concert to see it through.

Most of the people participating are quite familiar. The most familiar person in the transaction is the real estate agent. Next, the mortgage company provides the financial capital required to finance the deal. And the title company makes sure that all aspects of the exchange are completed and that a clear title transfers from the seller to the purchaser.

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 real estate is worth the amount being paid? In comes the appraiser. We provide an unbiased estimate 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 Appraisal Solutions will ensure, you as an interested party, are informed.

Appraisals start with the inspection

Our first responsibility at Appraisal Solutions 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, living areas, etc, to ensure they indeed exist and are in the condition a reasonable buyer would expect them to be. To ensure the stated square footage is accurate and illustrate the layout of the house, the inspection often entails creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious amenities - or defects - that would have an impact on the value of the house.

After the inspection, 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.

Cost Approach

Here, the appraiser pulls information on local construction costs, the cost of labor and other factors to figure out how much it would cost to build a property nearly identical to the one being appraised. This value commonly sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.

Paired Sales Analysis

Appraisers are intimately familiar with the subdivisions in which they appraise. They thoroughly understand the value of specific features to the residents of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the subject being appraised. Using knowledge of the value of 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 more accurately match the features of subject.

  • For example, if the comparable has a fireplace and the subject doesn't, the appraiser may subtract the value of a fireplace from the sales price of the comparable home.
  • However, if the subject property has an extra half-bathroom and the comparable does not, the appraiser might add an amount 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. At Appraisal Solutions, we are an authority in knowing the worth of real estate features in Princeton and Sherburne County neighborhoods. The sales comparison approach to value is typically awarded the most weight when an appraisal is for a home sale.

Valuation Using the Income Approach

A third method of valuing a house is sometimes employed when a neighborhood 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 derive the current value.

Putting It All Together

Combining information from all approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. It is important to note that while the appraised value is probably the strongest indication of what a property 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 typically used 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 Appraisal Solutions will help you discover the most accurate property value, so you can make wise real estate decisions.