Understanding the Appraisal Process

A home purchase can be the biggest financial decision some might ever encounter. It doesn't matter if where you raise your family, a seasonal vacation property or an investment, purchasing real property is a complex financial transaction that requires multiple people working in concert to pull it all off.

The majority of the people involved are quite familiar. The most recognizable person in the transaction is the real estate agent. Next, the mortgage company provides the money needed to fund the transaction. And ensuring all requirements of the transaction are completed and that the title is clear to transfer from the seller to the buyer 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 makes sure the property is worth the purchase price? In comes the appraiser. We provide an unbiased opinion 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 Steve Ettien Appraisals, LLC. will ensure, you as an interested party, are informed.

Appraisals start with the home inspection

Our first responsibility at Steve Ettien Appraisals, LLC. is to inspect the property to ascertain its true status. We must see features hands on, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they truly are there and are in the condition a typical buyer would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is proper and conveying the layout of the property. Most importantly, the appraiser looks for any obvious amenities - or defects - that would affect the value of the property.

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

Cost Approach

This is where the appraiser analyzes information on local building costs, the cost of labor and other elements to determine how much it would cost to construct a property nearly identical to the one being appraised. This estimate commonly sets the maximum 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 subdivisions in which they work. They thoroughly understand the value of certain features to the people of that area. Then, the appraiser researches recent sales in the neighborhood and finds properties which are 'comparable' to the subject at hand. By assigning a dollar value to certain items such as fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, we add or subtract from each comparable's sales price so that they more accurately portray the features of subject.

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

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. When it comes to valuing features of homes in Manns Choice and Bedford, Steve Ettien Appraisals, LLC. can't be beat. This approach to value is most often given the most importance when an appraisal is for a real estate sale.

Valuation Using the Income Approach

A third method of valuing real estate is sometimes used when an area has a reasonable number of rental properties. In this case, the amount of income the real estate generates is factored in with income produced by comparable properties to derive the current value.

Coming Up With The Final Value

Examining the data from all approaches, the appraiser is then ready to put down an estimated market value for the property at hand. The estimate of value at the bottom of the appraisal report is not necessarily what's being paid for the property even though it is likely the best indication of what a property is worth. Prices can always 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 employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. At the end of the day, an appraiser from Steve Ettien Appraisals, LLC. will help you attain the most accurate property value, so you can make the most informed real estate decisions.