Comprehending Appraisals

Getting a house can be the most serious financial decision many of us could ever consider. It doesn't matter if where you raise your family, a seasonal vacation property or one of many rentals, purchasing real property is a detailed financial transaction that requires multiple parties to make it all happen.

Most of the parties involved are very familiar. The most recognizable face in the exchange is the real estate agent. Then, the mortgage company provides the money required to finance the exchange. And ensuring all areas of the exchange are completed and that the title is clear to pass 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 property is worth the purchase price? This is where you meet the appraiser. We provide an unbiased estimate 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 SUMMIT APPRAISAL SERVICES, LLC 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 complete a thorough inspection. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they indeed are present and are in the shape a typical person would expect them to be. To ensure the stated square footage has not been misrepresented and document the layout of the home, the inspection often entails 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.

After the inspection, an appraiser uses 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 uses information on local construction costs, labor rates and other elements to determine how much it would cost to replace the property being appraised. This value often sets the upper limit on what a property would sell for. It's also the least used predictor of value.

Paired Sales Analysis

Appraisers become very familiar with the communities in which they work. They innately understand the value of certain features to the residents of that area. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are 'comparable' to the property at hand. By assigning a dollar value to 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 match the features of subject property.

  • For example, if the comparable has an extra half bath that the subject doesn't, the appraiser may deduct 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.

After all differences have been accounted for, 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 Jackson and Teton, SUMMIT APPRAISAL SERVICES, LLC is second to none. The sales comparison approach to value is commonly awarded the most consideration when an appraisal is for a home exchange.

Valuation Using the Income Approach

A third method of valuing a property is sometimes employed when a neighborhood has a measurable number of rental properties. In this case, the amount of revenue the property yields is factored in with income produced by neighboring properties to derive the current value.

The Bottom Line

Examining the data from all applicable approaches, the appraiser is then ready to document an estimated market value for the property at hand. The estimate of value at the bottom of the appraisal report is not always the final sales price even though it is likely the best indication of a property's valueThere are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust an offer or listing price up or down. Regardless, the appraised value is typically employed 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 sell the property again. The bottom line is, an appraiser from SUMMIT APPRAISAL SERVICES, LLC will guarantee you get the most fair and balanced property value, so you can make wise real estate decisions.