Making Sense of the Appraisal Process

Acquiring a home can be the most serious transaction many might ever encounter. It doesn't matter if a primary residence, a second vacation property or one of many rentals, purchasing real property is a complex transaction that requires multiple people working in concert to pull it all off.

Most people are familiar with the parties having a role in the transaction. The most familiar entity in the exchange is the real estate agent. Then, the mortgage company provides the financial capital required to fund the transaction. And the title company makes sure that all areas of the exchange are completed and that the title is clear to pass 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 makes sure the real estate is worth the purchase price? This is where you meet the appraiser. We provide an unbiased opinion 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 Donna Schiener Appraiser will ensure, you as an interested party, are informed.

Appraisals start with the home inspection

Our first task at Donna Schiener Appraiser is to inspect the property to ascertain its true status. We must physically see features, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really are there and are in the condition a reasonable person would expect them to be. To make sure the stated size of the property has not been misrepresented and describe the layout of the home, the inspection often includes 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 sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.

Cost Approach

Here, the appraiser uses information on local construction costs, the cost of labor and other factors to calculate how much it would cost to construct a property nearly identical to the one being appraised. This value commonly sets the maximum on what a property would sell for. It's also the least used method.

Paired Sales Analysis

Appraisers become very familiar with the communities in which they appraise. They innately understand the value of certain features to the residents of that area. Then, the appraiser looks up recent sales in the vicinity and finds properties which are 'comparable' to the subject in question. By assigning a dollar value to certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or extra storage space, we adjust the comparable properties so that they are more accurately in line with the features of subject.

For example, if the comparable property has an extra half bath that the subject doesn't, the appraiser may deduct the value of that half bath from the sales price of the comparable.
However, 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 Arcade and Wyoming, Donna Schiener Appraiser is your local authority. This approach to value is typically awarded the most importance when an appraisal is for a real estate exchange.

Valuation Using the Income Approach

A third way of valuing a property is sometimes employed when a neighborhood has a measurable number of rental properties. In this scenario, the amount of revenue the property produces is factored in with income produced by comparable properties to derive the current value.

Putting It All Together

Combining information from all applicable approaches, the appraiser is then ready to state an estimated market value for the property at hand. Note: While this amount is probably the most accurate indication of what a property is worth, it probably will not be the price at which the property closes. There are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust an offer or listing price 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. The bottom line is, an appraiser from Donna Schiener Appraiser will help you get the most accurate property value, so you can make profitable real estate decisions.