Real Property Appraisals: A Primer

A home purchase can be the most serious investment most of us might ever encounter. It doesn't matter if a primary residence, a seasonal vacation property or one of many rentals, the purchase of real property is a complex transaction that requires multiple people working in concert to see it through.

Most people are familiar with the parties taking part in the transaction. The real estate agent is the most familiar face in the transaction. Next, the lender provides the money necessary to finance the exchange. And ensuring all requirements of the transaction are completed and that the title is clear to pass to the buyer from the seller is the title company.

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So, who's responsible for making sure the real estate is worth the amount being paid? This is where the appraiser comes in. 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 Alexandria Bedford will ensure, you as an interested party, are informed.

Appraisals begin with the property inspection

To ascertain the true status of the property, it's our duty to first complete a thorough inspection. We must see features hands on, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really exist and are in the condition a reasonable buyer would expect them to be. To ensure the stated size of the property is accurate and document the layout of the home, the inspection often requires creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious features - 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 the property: paired sales analysis and, in the case of a rental property, an income approach.

Cost Approach

Here, the appraiser gathers information on local construction costs, labor rates and other elements to determine how much it would cost to construct a property comparable to the one being appraised. This figure commonly sets the upper limit on what a property would sell for. The cost approach is also the least used predictor of value.

Analyzing Comparable Sales

Appraisers can tell you a lot about the subdivisions in which they work. They innately understand the value of specific features to the residents of that area. Then, the appraiser researches recent sales in the area and finds properties which are 'comparable' to the home in question. 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 more accurately portray 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.
  • 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.

In the end, 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 valuing features of homes in Fayetteville and Onondaga, Alexandria Bedford is your local authority. The sales comparison approach to value is usually awarded the most consideration when an appraisal is for a home sale.

Valuation Using the Income Approach

A third method of valuing approach to value is sometimes employed when a neighborhood has a reasonable number of rental properties. In this case, the amount of income the property produces is factored in with other rents in the area for comparable properties to determine the current value.

The Bottom Line

Examining the data from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the property in question. It is important to note that 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. Prices can always be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. Regardless, the appraised value is typically used as a guideline for lenders who don't want to loan a buyer more money than they could recover in case they had to put the property on the market again. At the end of the day, an appraiser from Alexandria Bedford will guarantee you attain the most accurate property value, so you can make wise real estate decisions.