Making Sense of the Appraisal Process

Acquiring a house can be the most significant transaction most of us will ever make. It doesn't matter if a primary residence, a seasonal vacation property or one of many rentals, purchasing real property is a detailed transaction that requires multiple parties to make it all happen.

The majority of the parties involved are very familiar. The most familiar face in the exchange is the real estate agent. Next, the lender provides the financial capital necessary to fund the exchange. And ensuring all aspects 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, what party is responsible for making sure the value of the property is consistent with the amount being paid? This is where you meet the appraiser. We provide an unbiased estimate 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 Harris Appraisals LLC will ensure, you as an interested party, are informed.

The inspection is where an appraisal starts

Our first responsibility at Harris Appraisals LLC is to inspect the property to ascertain its true status. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly are there and are in the condition a typical person would expect them to be. To ensure the stated size of the property is accurate and illustrate the layout of the house, the inspection often includes creating a sketch of the floorplan. Most importantly, we identify any obvious amenities - or defects - that would affect the value of the property.

Following the inspection, we use 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, we analyze information on local building costs, the cost of labor and other factors to calculate how much it would cost to construct a property similar to the one being appraised. This value commonly sets the upper limit on what a property would sell for. The cost approach is also the least used method.

Sales Comparison

Appraisers get to know 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 transactions in close proximity to the subject and finds properties which are 'comparable' to the home 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 adjust the comparable properties so that they are more accurately in line with the features of subject.

  • For example, if the comparable property 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.

After all differences have been accounted for, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At Harris Appraisals LLC, we are an authority when it comes to knowing the value of real estate features in Alexander City and Tallapoosa County neighborhoods. This approach to value is commonly given the most weight when an appraisal is for a home purchase.

Valuation Using the Income Approach

A third method of valuing a property is sometimes employed when a neighborhood has a reasonable number of rental properties. In this situation, the amount of income the property produces is factored in with income produced by nearby properties to give an indicator of the current value.

Putting It All Together

Combining information from all approaches, the appraiser is then ready to stipulate an estimated market value for the property in question. Note: While the appraised value is probably the most accurate indication of what a property is worth, it probably will not be the final sales price. There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust an offer or listing price up or down. Regardless, the appraised value is often employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. It all comes down to this, an appraiser from Harris Appraisals LLC will guarantee you attain the most accurate property value, so you can make wise real estate decisions.