A Description of the Appraisal Process

Buying real estate can be the largest transaction many of us might ever consider. It doesn't matter if where you raise your family, a seasonal vacation home or an investment, purchasing real property is a complex transaction that requires multiple people working in concert to make it all happen.

Practically all the participants are very familiar. The real estate agent is the most known face in the transaction. Then, the lender provides the money necessary to fund the exchange. And ensuring all requirements of the transaction are completed and that a clear title transfers from the seller to the buyer is the title company.

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So, what party is responsible for making sure the value of the real estate is consistent with the purchase price? 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 Bambrick Appraisals 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 responsibility to first complete a thorough inspection. We must physically view 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 typical person would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is accurate and conveying the layout of the property. Most importantly, the appraiser identifies any obvious amenities - or defects - that would have an impact on the value of the house.

Once the site has been inspected, an appraiser uses two or three approaches to determining the value of the property: sales comparison and, in the case of a rental property, an income approach.

Replacement Cost

This is where we use information on local building costs, labor rates and other factors to figure out how much it would cost to replace the property being appraised. This estimate often sets the maximum on what a property would sell for. The cost approach is also the least used method.

Sales Comparison

Appraisers become very familiar with the neighborhoods in which they appraise. They thoroughly understand the value of certain features to the residents of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the home being appraised. Using knowledge of the value of certain items such as upgraded appliances, extra bathrooms, additional living area, quality of construction, lot size, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject.

  • If, for example, the comparable has a storm shelter and the subject doesn't, 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.

A true estimate of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. At Bambrick Appraisals, we are experts when it comes to knowing the value of real estate features in Paris and Logan County neighborhoods. The sales comparison approach to value is commonly given the most consideration when an appraisal is for a real estate sale.

Valuation Using the Income Approach

A third way of valuing real estate is sometimes employed when a neighborhood has a reasonable number of renter occupied properties. In this case, the amount of income the real estate yields is factored in with other rents in the area for comparable properties to determine the current value.

The Bottom Line

Combining information from all approaches, the appraiser is then ready to stipulate 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 case they had to put the property on the market again. At the end of the day, an appraiser from Bambrick Appraisals will help you discover the most fair and balanced property value, so you can make profitable real estate decisions.