A Description of the Appraisal Process

Purchasing a house can be the most significant financial decision some could ever consider. Whether it's a main residence, a second vacation property or a rental fixer upper, purchasing real property is a complex transaction that requires multiple parties to make it all happen.

The majority of the participants are quite familiar. The real estate agent is the most recognizable entity in the transaction. Then, the mortgage company provides the financial capital required to finance the exchange. And ensuring all areas of the exchange are completed and that the title is clear to pass to the buyer from the seller 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? In comes the appraiser. We provide an unbiased opinion of what a buyer might 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 Tim Arnett will ensure, you as an interested party, are informed.

The inspection is where an appraisal starts

Our first task at Tim Arnett is to inspect the property to determine its true status. We must physically see aspects of the property, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they truly exist and are in the shape a typical person would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is proper and conveying the layout of the property. Most importantly, the appraiser looks for any obvious features - or defects - that would have an impact on the value of the house.

Following the inspection, we use two or three approaches to determining the value of the property: sales comparison and, in the case of a rental property, an income approach.

Cost Approach

Here, we pull information on local construction costs, labor rates and other elements to calculate how much it would cost to build a property similar to the one being appraised. This figure usually sets the upper limit on what a property would sell for. The cost approach is also the least used method.

Paired Sales Analysis

Appraisers become very familiar with the subdivisions in which they work. They thoroughly understand the value of particular features to the people of that area. Then, the appraiser researches recent transactions in close proximity to the subject and finds properties which are 'comparable' to the property being appraised. By assigning a dollar value to certain items such as square footage, extra 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 are more accurately in line with 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 home.
  • 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.

A true 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 associating a value with features of homes in Sedalia and Pettis, Tim Arnett is your local authority. The sales comparison approach to value is usually awarded the most consideration when an appraisal is for a home exchange.

Valuation Using the Income Approach

A third way of valuing a house is sometimes applied when a neighborhood has a measurable number of rental properties. In this case, the amount of income the real estate generates is factored in with income produced by neighboring properties to give an indicator of the current value.

The Bottom Line

Analyzing the data from all applicable approaches, the appraiser is then ready to state an estimated market value for the subject property. The estimate of value on the appraisal report is not always what's being paid for the property even though it is likely the best indication of a property's valueDepending on the specific 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 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 Tim Arnett will guarantee you discover the most fair and balanced property value, so you can make the most informed real estate decisions.