Understanding Appraisals

Getting real estate can be the most serious transaction many could ever make. It doesn't matter if where you raise your family, a seasonal vacation property or a rental fixer upper, purchasing real property is a detailed transaction that requires multiple people working in concert to see it through.

You're likely to be familiar with the parties having a role in the transaction. The real estate agent is the most recognizable entity in the exchange. Then, the lender provides the money needed to fund the transaction. The title company makes sure that all details of the sale are completed and that a clear title transfers 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, what party is responsible for making sure the value of the real estate is in line with the amount being paid? In comes the appraiser. We provide an unbiased opinion of what a buyer could 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 UNcommon Appraisor Group will ensure, you as an interested party, are informed.

Appraisals start with the inspection

To ascertain an accurate status of the property, it's our duty to first conduct a thorough inspection. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really exist and are in the shape a reasonable buyer would expect them to be. To make sure the stated size of the property has not been misrepresented and convey the layout of the home, the inspection often requires creating a sketch of the floorplan. Most importantly, we look for any obvious features - or defects - that would have an impact on the value of the house.

Back at the office, an appraiser uses 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, labor rates and other factors to ascertain how much it would cost to build a property nearly identical to the one being appraised. This figure usually sets the upper limit on what a property would sell for. It's also the least used predictor of value.

Sales Comparison

Appraisers get to know the neighborhoods in which they work. They innately understand the value of specific features to the people 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. 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 property.

  • 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 has an extra half-bathroom and the comparable does not, the appraiser might add an amount to the comparable property.

A valid 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 Columbia and Howard, UNcommon Appraisor Group can't be beat. This approach to value is usually 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 a third approach to value. In this scenario, the amount of income the property yields is factored in with income produced by similar properties to derive the current value.

Reconciliation

Combining information from all applicable approaches, the appraiser is then ready to state an estimated market value for the property in question. Note: While the appraised value is probably the strongest indication of what a house is worth, it may 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'. But the appraised value is often used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. Here's what it all boils down to, an appraiser from UNcommon Appraisor Group will help you attain the most fair and balanced property value, so you can make wise real estate decisions.