An Overview of the Appraisal Process

Purchasing real estate can be the largest investment many will ever make. It doesn't matter if where you raise your family, a seasonal vacation property or one of many rentals, purchasing real property is an involved transaction that requires multiple parties to pull it all off.

It's likely you are familiar with the parties having a role in the transaction. The real estate agent is the most known person in the transaction. Then, the mortgage company provides the financial capital required to fund the deal. And ensuring all areas of the exchange 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, who makes sure the value of the property is in line with the amount being paid? 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 Quality Time Appraisals will ensure, you as an interested party, are informed.

The inspection is where an appraisal begins

To determine the true status of the property, it's our duty to first conduct a thorough inspection. We must actually see aspects of the property, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly exist and are in the condition a reasonable buyer would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is proper and illustrating the layout of the property. Most importantly, the appraiser looks for any obvious features - or defects - that would have an impact on the value of the house.

Following the inspection, 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.

Cost Approach

This is where the appraiser analyzes information on local construction costs, labor rates and other elements to ascertain how much it would cost to replace the property being appraised. This figure commonly sets the upper limit on what a property would sell for. It's also the least used method.

Analyzing Comparable Sales

Appraisers become very familiar with the neighborhoods in which they appraise. They thoroughly understand the value of certain features to the homeowners of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the property 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 more accurately portray the features of subject property.

  • If, for example, the comparable has an irrigation system and the subject does not, the appraiser may deduct the value of an irrigation system 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 an amount to the comparable property.

An opinion 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 Dayton and Middlesex, Quality Time Appraisals can't be beat. The sales comparison approach to value is typically awarded the most weight when an appraisal is for a real estate purchase.

Valuation Using the Income Approach

A third method of valuing a house is sometimes used when an area has a measurable number of renter occupied properties. In this case, the amount of revenue the real estate yields 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

Examining the data from all applicable approaches, the appraiser is then ready to document an estimated market value for the property at hand. It is important to note that while the appraised value is probably the most reliable indication of what a property is worth, it may not be the price at which the property closes. There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust the final price up or down. But the appraised value is often used as a guideline for lenders who don't want to loan a buyer more money than they could get back in the event they had to put the property on the market again. The bottom line is, an appraiser from Quality Time Appraisals will help you discover the most fair and balanced property value, so you can make the most informed real estate decisions.