Comprehending Appraisals

Their home's purchase is the most significant financial decision most people may ever make. It doesn't matter if where you raise your family, a second vacation property or one of many rentals, the purchase of real property is a complex financial transaction that requires multiple people working in concert to see it through.

Most people are familiar with the parties having a role in the transaction. The most recognizable person in the transaction is the real estate agent. Next, the bank provides the money required to fund the exchange. And ensuring all aspects of the transaction are completed and that a clear title passes from the seller to the purchaser 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 you meet 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 Aspen Appraisal Company (336)272-8822 will ensure, you as an interested party, are informed.

Inspecting the subject property

To determine the true status of the property, it's our duty to first perform a thorough inspection. We must actually see features, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they truly exist and are in the condition a reasonable buyer would expect them to be. To make sure the stated square footage is accurate and illustrate the layout of the property, the inspection often requires creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious features - or defects - that would have an impact on the value of the house.

Once the site has been inspected, we use two or three approaches to determining the value of the 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 uses information on local construction costs, the cost of labor and other elements to ascertain how much it would cost to construct a property similar to the one being appraised. This figure commonly sets the maximum on what a property would sell for. The cost approach is also the least used method.

Sales Comparison

Appraisers are intimately familiar with the neighborhoods in which they appraise. They innately understand the value of particular features to the people of that area. Then, the appraiser researches recent sales 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 square footage, extra bathrooms, hardwood floors, fireplaces or view lots (just to name a few), 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.

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 Aspen Appraisal Company (336)272-8822, we are experts in knowing the value of particular items in Greensboro and Guilford County neighborhoods. The sales comparison approach to value is typically awarded 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 applied when an area has a reasonable number of rental properties. In this scenario, the amount of income the property produces is taken into consideration along with other rents in the area for comparable properties to derive the current value.

The Bottom Line

Combining information from all approaches, the appraiser is then ready to put down an estimated market value for the property in question. The estimate of value on the appraisal report is not always what's being paid for the property even though it is likely the best indication of a property's valueDepending 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.But the appraised value is typically used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. Here's what it all boils down to, an appraiser from Aspen Appraisal Company (336)272-8822 will guarantee you discover the most fair and balanced property value, so you can make wise real estate decisions.