What Is an Appraisal?

Getting a house can be the most important investment some will ever consider. Whether it's where you raise your family, a seasonal vacation property or an investment, the purchase of real property is a complex transaction that requires multiple parties to make it all happen.

Most of the parties involved are quite familiar. The most familiar entity in the exchange is the real estate agent. Next, the mortgage company provides the financial capital required to bankroll the deal. And ensuring all aspects of the sale are completed and that a clear title passes to the buyer from the seller 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, what party makes sure the real estate is worth the amount being paid? In comes 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 Property Valuation Group will ensure, you as an interested party, are informed.

The inspection is where an appraisal starts

To determine the true status of the property, it's our duty to first perform a thorough inspection. We must actually view aspects of the property, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really are there and are in the condition a reasonable person would expect them to be. To ensure the stated size of the property is accurate and illustrate the layout of the property, 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.

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 pulls information on local building costs, the cost of labor and other factors to derive how much it would cost to construct a property similar to the one being appraised. This figure commonly sets the upper limit on what a property would sell for. It's also the least used predictor of value.

Analyzing Comparable Sales

Appraisers can tell you a lot about the neighborhoods in which they appraise. They thoroughly understand the value of specific features to the residents of that area. Then, the appraiser researches recent transactions in the area and finds properties which are 'comparable' to the property at hand. Using knowledge of the value of certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or additional storage space, we add or subtract from each comparable's sales price 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 does not, the appraiser may subtract the value of a fireplace from the sales price of the comparable.
  • However, if the subject has an extra half-bathroom and the comparable does not, the appraiser might add a certain amount 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 Ferndale and Oakland, Property Valuation Group can't be beat. This approach to value is commonly given the most weight when an appraisal is for a real estate purchase.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - we may use an additional way of valuing a property. In this situation, the amount of income the property yields is taken into consideration along with income produced by neighboring properties to determine the current value.

Reconciliation

Analyzing the data from all approaches, the appraiser is then ready to document 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 what a property is worth. Depending 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 often used 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 put the property on the market again. The bottom line is, an appraiser from Property Valuation Group will guarantee you get the most fair and balanced property value, so you can make the most informed real estate decisions.