Understanding the Appraisal Process

Their home's purchase can be the biggest transaction many of us will ever make. Whether it's where you raise your family, a second vacation property or an investment, the purchase of real property is a detailed financial transaction that requires multiple parties to see it through.

You're probably familiar with the parties having a role in the transaction. The most recognizable face in the exchange is the real estate agent. Then, the bank provides the financial capital needed to finance the transaction. And ensuring all details of the sale are completed and that a clear title transfers 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? This is where the appraiser comes in. 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 Gorham Property Appraisal will ensure, you as an interested party, are informed.

Appraisals start with the property inspection

To ascertain an accurate status of the property, it's our duty to first conduct a thorough inspection. We must physically see aspects of the property, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed exist and are in the shape a reasonable 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, we identify any obvious features - or defects - that would have an impact on the value of the house.

Back at the office, we use two or three approaches to determining the value of real property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.

Replacement Cost

This is where we pull information on local construction costs, labor rates and other elements to derive how much it would cost to build a property nearly identical to the one being appraised. This estimate usually sets the maximum on what a property would sell for. It's also the least used method.

Analyzing Comparable Sales

Appraisers get to know the neighborhoods in which they work. 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 subject at hand. Using knowledge of the value of certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or extra 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.

  • If, for example, the comparable has an extra half bath that the subject doesn't, the appraiser may deduct the value of that half bath 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 an amount to the comparable property.

A true estimate of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. When it comes to valuing features of homes in Scottsdale and Maricopa, Gorham Property Appraisal can't be beat. The sales comparison approach to value is commonly awarded the most importance when an appraisal is for a home exchange.

Valuation Using the Income Approach

A third way of valuing a property is sometimes applied when a neighborhood has a reasonable number of rental properties. In this situation, the amount of income the property yields is factored in with other rents in the area for comparable properties to determine the current value.

Coming Up With The Final Value

Examining the data from all applicable approaches, the appraiser is then ready to document an estimated market value for the property in question. It is important to note that while the appraised value is probably the most reliable indication of what a house 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 the final 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 they could get back in case they had to sell the property again. Here's what it all boils down to, an appraiser from Gorham Property Appraisal will guarantee you get the most accurate property value, so you can make wise real estate decisions.