Understanding Appraisals

Buying a house can be the most important financial decision most of us may ever make. It doesn't matter if a main residence, a seasonal vacation property or an investment, the purchase of real property is an involved financial transaction that requires multiple parties to make it all happen.

Most of the participants are quite familiar. The real estate agent is the most known face in the transaction. Next, the lender provides the money required to fund the deal. And the title company makes sure that all details of the sale are completed and that a clear title transfers to the buyer from the seller.

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 real estate is consistent 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 property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Reliable Appraisals Inc. will ensure, you as an interested party, are informed.

Appraisals start with the property inspection

Our first task at Reliable Appraisals Inc. is to inspect the property to determine its true status. We must physically view aspects of the property, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they truly are there and are in the shape a reasonable buyer would expect them to be. To ensure the stated size of the property is accurate and document the layout of the home, the inspection often requires creating a sketch of the floorplan. Most importantly, the appraiser looks for 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 the property: paired sales analysis and, in the case of a rental property, an income approach.

Replacement Cost

This is where we analyze information on local construction costs, the cost of labor and other factors to ascertain how much it would cost to build a property similar to the one being appraised. This value usually sets the upper limit on what a property would sell for. It's also the least used predictor of value.

Sales Comparison

Appraisers become very familiar with the subdivisions in which they appraise. They innately understand the value of certain features to the people of that area. Then, the appraiser researches recent sales in the area and finds properties which are 'comparable' to the home at hand. Using knowledge of the value of certain items such as square footage, additional bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we add or subtract from each comparable's sales price so that they more accurately portray the features of subject.

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

A valid estimate of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. At Reliable Appraisals Inc., we are an authority when it comes to knowing the value of real estate features in Berea and Madison County neighborhoods. The sales comparison approach to value is commonly given the most importance 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 - the appraiser may use a third approach to value. In this situation, the amount of income the real estate generates is taken into consideration along with other rents in the area for comparable properties to determine the current value.

Coming Up With The Final Value

Combining information from all applicable approaches, the appraiser is then ready to put down an estimated market value for the subject property. Note: While this amount is probably the strongest indication of what a property is worth, it may not be the final sales price. It's not uncommon for prices to be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. Regardless, the appraised value is often 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 Reliable Appraisals Inc. will guarantee you discover the most fair and balanced property value, so you can make wise real estate decisions.