Decoding the Appraisal Process

Acquiring a house can be the most serious financial decision many of us might ever consider. It doesn't matter if a primary residence, an additional vacation property or an investment, purchasing real property is an involved financial transaction that requires multiple people working in concert to make it all happen.

The majority of the participants are very familiar. The most recognizable face in the exchange is the real estate agent. Then, the mortgage company provides the money required to fund the exchange. And the title company sees to it that all details of the sale are completed and that the title is clear to pass to the buyer from the seller.

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So, who makes sure the value of the real estate is consistent with 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 parcel of real estate, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Evans Appraisal Services will ensure, you as an interested party, are informed.

The inspection is where an appraisal starts

Our first duty at Evans Appraisal Services is to inspect the property to ascertain its true status. We must actually view features, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they indeed are present and are in the condition a typical buyer would expect them to be. To ensure the stated size of the property has not been misrepresented and convey the layout of the home, the inspection often entails creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious features - or defects - that would affect the value of the house.

Once the site has been inspected, 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.

Replacement Cost

This is where we analyze information on local building costs, labor rates and other elements to derive how much it would cost to construct a property similar to the one being appraised. This value usually 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 get to know the subdivisions in which they work. They thoroughly understand the value of particular features to the residents of that area. Then, the appraiser looks up recent transactions in the area and finds properties which are 'comparable' to the real estate 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 more accurately portray 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 home.
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. At Evans Appraisal Services, we are experts in knowing the value of particular items in Westlake and Cuyahoga County neighborhoods. The sales comparison approach to value is commonly awarded 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 a third approach to value. In this situation, the amount of revenue the property yields is factored in with other rents in the area for comparable properties to derive the current value.

Putting It All Together

Analyzing the data from all applicable approaches, the appraiser is then ready to put down an estimated market value for the property in question. It is important to note that while this amount is probably the strongest indication of what a house is worth, it may not be the final sales price. Depending on the specific circumstances 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 employed as a guideline for lenders who don't want to loan a buyer more money than they could recover in case they had to sell the property again. The bottom line is, an appraiser from Evans Appraisal Services will guarantee you attain the most accurate property value, so you can make the most informed real estate decisions.