Making Sense of the Appraisal Process

Their home's purchase can be the most significant financial decision some will ever make. Whether it's a primary residence, a second vacation property or an investment, purchasing real property is a complex transaction that requires multiple parties to see it through.

It's likely you are familiar with the parties having a role in the transaction. The real estate agent is the most recognizable entity in the exchange. Then, the lender provides the money needed to bankroll the transaction. And ensuring all aspects of the sale are completed and that a clear title transfers from the seller to the purchaser is the title company.

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So, who makes sure the real estate is worth the purchase price? This is where you meet the appraiser. We provide an unbiased estimate of what a buyer might expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Timberline Appraisals will ensure, you as an interested party, are informed.

Appraisals begin with the property inspection

Our first duty at Timberline Appraisals is to inspect the property to determine its true status. We must physically see features, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they truly are present and are in the shape a reasonable person would expect them to be. To ensure the stated square footage is accurate and describe the layout of the property, 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 house.

Following the inspection, 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.

Cost Approach

Here, we gather information on local construction costs, labor rates and other factors to derive how much it would cost to replace the property being appraised. This value often sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.

Analyzing Comparable Sales

Appraisers can tell you a lot about the communities 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 real estate being appraised. 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 adjust the comparable properties so that they more accurately portray the features of subject.

  • For example, if the comparable has a storm shelter and the subject does not, the appraiser may deduct the value of a storm shelter from the sales price of the comparable home.
  • If the subject has an extra half-bathroom and the comparable does not, the appraiser might add a certain amount to the comparable property.

In the end, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At Timberline Appraisals, we are experts in knowing the value of real estate features in Brodhead and Green County neighborhoods. The sales comparison approach to value is most often given the most weight when an appraisal is for a real estate sale.

Valuation Using the Income Approach

A third method of valuing a property is sometimes used when a neighborhood has a reasonable number of renter occupied properties. In this scenario, the amount of income the property generates is factored in with other rents in the area for comparable properties to give an indicator of the current value.

Arriving at a Value Conclusion

Combining information from all approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. It is important to note that while this amount is probably the strongest indication of what a property is worth, it probably will not be the final sales price. Depending on the individual 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.But the appraised value is typically employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. At the end of the day, an appraiser from Timberline Appraisals will guarantee you discover the most accurate property value, so you can make profitable real estate decisions.