Home Appraisals: A Primer

A home purchase is the most serious transaction many could ever consider. Whether it's where you raise your family, a seasonal vacation property or an investment, purchasing real property is a complex transaction that requires multiple parties to pull it all off.

You're likely to be familiar with the parties taking part in the transaction. The most familiar entity in the transaction is the real estate agent. Next, the mortgage company provides the financial capital needed to finance the exchange. And ensuring all requirements of the sale are completed and that a clear title passes 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 value of the property is consistent with the amount being paid? In comes the appraiser. We provide an unbiased opinion 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 Bill Brown Appraisals will ensure, you as an interested party, are informed.

The inspection is where an appraisal starts

Our first duty at Bill Brown Appraisals is to inspect the property to determine its true status. We must physically view features, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really exist and are in the shape a typical buyer would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is accurate and illustrating the layout of the property. Most importantly, the appraiser looks for any obvious features - or defects - that would affect the value of the house.

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

Replacement Cost

Here, we gather information on local building costs, labor rates and other factors to derive how much it would cost to build a property similar to the one being appraised. This value commonly sets the maximum on what a property would sell for. The cost approach is also the least used method.

Analyzing Comparable Sales

Appraisers are intimately familiar with the neighborhoods in which they work. They innately understand the value of particular features to the homeowners of that area. Then, the appraiser researches recent sales in the area and finds properties which are 'comparable' to the property being appraised. By assigning a dollar value to certain items such as upgraded appliances, additional bathrooms, additional living area, quality of construction, lot size, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject property.

  • For example, if the comparable has an irrigation system and the subject does not, the appraiser may subtract the value of an irrigation system from the sales price of the comparable home.
  • If the subject property has an extra half-bathroom and the comparable does not, the appraiser might add an amount to the comparable property.

An opinion of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. At Bill Brown Appraisals, we are an authority in knowing the worth of real estate features in Farmington and Washington County neighborhoods. The sales comparison approach to value is most often awarded the most consideration when an appraisal is for a real estate sale.

Valuation Using the Income Approach

A third way of valuing real estate is sometimes used when a neighborhood has a reasonable number of renter occupied properties. In this situation, the amount of revenue the property yields is factored in with other rents in the area for comparable properties to give an indicator of the current value.

Coming Up With The Final Value

Combining information from all approaches, the appraiser is then ready to document an estimated market value for the subject property. 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 a property's valueThere are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust the final price 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. Here's what it all boils down to, an appraiser from Bill Brown Appraisals will help you attain the most fair and balanced property value, so you can make the most informed real estate decisions.