Real Property Appraisals: A Primer

Their home's purchase is the most significant investment most of us will ever consider. It doesn't matter if a main residence, a seasonal vacation property or an investment, purchasing real property is a complex transaction that requires multiple people working in concert to pull it all off.

Most of the participants are very familiar. The most recognizable person in the transaction is the real estate agent. Next, the bank provides the financial capital required to bankroll the transaction. And ensuring all requirements of the transaction are completed and that a clear title transfers from the seller to the purchaser is the title company.

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So, what party is responsible for making sure the property is worth the purchase price? This is where you meet 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 Appraisal Solutions Inc. 970-259-9868 will ensure, you as an interested party, are informed.

The inspection is where an appraisal starts

Our first duty at Appraisal Solutions Inc. 970-259-9868 is to inspect the property to ascertain its true status. We must actually see aspects of the property, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really are present and are in the shape a typical buyer would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is correct and illustrating the layout of the property. Most importantly, the appraiser identifies any obvious features - or defects - that would have an impact on the value of the property.

Back at the office, an appraiser uses two or three approaches to determining the value of the property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.

Cost Approach

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

Sales Comparison

Appraisers can tell you a lot about the communities in which they appraise. They innately understand the value of certain features to the residents of that area. Then, the appraiser researches recent transactions 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 upgraded appliances, additional bathrooms, additional living area, quality of construction, lot size, we adjust the comparable properties so that they are more accurately in line with the features of subject property.

For example, if the comparable property has a storm shelter and the subject does not, the appraiser may subtract the value of a storm shelter from the sales price of the comparable.
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.

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. When it comes to associating a value with features of homes in Durango and La Plata, Appraisal Solutions Inc. 970-259-9868 is second to none. This approach to value is commonly given the most consideration when an appraisal is for a home sale.

Valuation Using the Income Approach

A third way of valuing real estate is sometimes applied when a neighborhood has a reasonable number of rental properties. In this case, the amount of revenue the property produces is factored in with income produced by nearby properties to determine the current value.

Reconciliation

Combining information from all approaches, the appraiser is then ready to put down an estimated market value for the property in question. The estimate of value on the appraisal report is not necessarily what's being paid for the property even though it is likely the best indication of a property's valuePrices 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 the event they had to sell the property again. The bottom line is, an appraiser from Appraisal Solutions Inc. 970-259-9868 will help you discover the most fair and balanced property value, so you can make wise real estate decisions.