Understanding Appraisals

Getting real estate is the largest financial decision many of us could ever encounter. Whether it's a main residence, a seasonal vacation home or a rental fixer upper, purchasing real property is a complex financial transaction that requires multiple parties to make it all happen.

It's likely you are familiar with the parties having a role in the transaction. The most known face in the exchange is the real estate agent. Next, the lender provides the money necessary to bankroll the deal. The title company makes sure that all details of the exchange 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's responsible for making sure the value of the real estate is consistent with the purchase price? In comes the appraiser. We provide an unbiased estimate of what a buyer might expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Cynthia Martin will ensure, you as an interested party, are informed.

Inspecting the subject property

To ascertain the true status of the property, it's our responsibility to first complete a thorough inspection. We must physically view aspects of the property, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed exist and are in the shape a reasonable buyer would expect them to be. To ensure the stated size of the property has not been misrepresented and describe the layout of the home, the inspection often entails creating a sketch of the floorplan. Most importantly, we look for any obvious features - or defects - that would have an impact on the value of the house.

Following the inspection, an appraiser uses two or three approaches to determining the value of the property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.

Cost Approach

Here, we use information on local construction costs, the cost of labor and other factors to determine how much it would cost to construct a property comparable to the one being appraised. This figure commonly sets the maximum on what a property would sell for. It's also the least used method.

Analyzing Comparable Sales

Appraisers become very familiar with the communities in which they work. They thoroughly understand the value of certain features to the people of that area. Then, the appraiser looks up recent sales in the neighborhood and finds properties which are 'comparable' to the real estate being appraised. Using knowledge of the value of certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or additional storage space, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject property.

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.
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 putting a value on features of homes in Walnut Hill and Jefferson, Cynthia Martin is second to none. The sales comparison approach to value is usually given the most importance when an appraisal is for a home exchange.

Valuation Using the Income Approach

A third way of valuing approach to value is sometimes employed when a neighborhood has a measurable number of rental properties. In this scenario, the amount of revenue the real estate produces is taken into consideration along with other rents in the area for comparable properties to derive the current value.

The Bottom Line

Examining the data from all approaches, the appraiser is then ready to stipulate 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 valueDepending on the individual situations 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 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 put the property on the market again. The bottom line is, an appraiser from Cynthia Martin will guarantee you discover the most accurate property value, so you can make wise real estate decisions.