Comprehending Appraisals

A home purchase is the biggest financial decision many people might ever make. Whether it's where you raise your family, a second vacation property or a rental fixer upper, the purchase of real property is an involved transaction that requires multiple people working in concert to pull it all off.

Most people are familiar with the parties taking part in the transaction. The real estate agent is the most familiar face in the exchange. Next, the lender provides the financial capital necessary to finance the deal. And ensuring all details of the sale are completed and that the title is clear to transfer 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, who's responsible for making sure the real estate is worth the purchase price? In comes the appraiser. We provide an unbiased estimate 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 Real Property Valuations will ensure, you as an interested party, are informed.

Inspecting the subject property

Our first responsibility at Real Property Valuations is to inspect the property to ascertain its true status. We must actually view aspects of the property, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they indeed are there and are in the condition a typical person would expect them to be. To ensure the stated size of the property has not been misrepresented and describe the layout of the property, the inspection often includes creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious features - or defects - that would affect the value of the property.

Once the site has been inspected, 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

Here, the appraiser pulls information on local building costs, labor rates and other factors to derive how much it would cost to replace the property being appraised. This estimate commonly sets the upper limit on what a property would sell for. It's also the least used predictor of value.

Sales Comparison

Appraisers are intimately 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 transactions in close proximity to the subject and finds properties which are 'comparable' to the real estate being appraised. By assigning a dollar value to certain items such as fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, we adjust the comparable properties so that they more accurately portray the features of subject.

  • For example, if the comparable property has an extra half bath that the subject does not, the appraiser may subtract the value of that half bath from the sales price of the comparable.
  • However, 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.

Once all necessary adjustments have been made, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. When it comes to associating a value with features of homes in Clemmons and Forsyth, Real Property Valuations is second to none. The sales comparison approach to value is usually given the most importance when an appraisal is for a real estate sale.

Valuation Using the Income Approach

A third way of valuing a property is sometimes used when a neighborhood has a reasonable number of rental properties. In this scenario, the amount of income the real estate produces is taken into consideration along with other rents in the area for comparable properties to give an indicator of the current value.

Putting It All Together

Combining information from all approaches, the appraiser is then ready to document an estimated market value for the property in question. Note: While this amount is probably the most accurate indication of what a house is worth, it probably will 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'. But 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. The bottom line is, an appraiser from Real Property Valuations will guarantee you discover the most accurate property value, so you can make wise real estate decisions.