Comprehending Appraisals

A home purchase can be the most significant transaction many people may ever encounter. Whether it's a main residence, an additional vacation property or one of many rentals, purchasing real property is a complex transaction that requires multiple parties to see it through.

Practically all the people participating are very familiar. The most recognizable face in the exchange is the real estate agent. Then, the lender provides the financial capital needed to finance the transaction. And ensuring all details of the exchange are completed and that the title is clear to transfer 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, who's responsible for making sure the property is worth the amount being paid? This is where you meet 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 a la mode will ensure, you as an interested party, are informed.

Inspecting the subject property

Our first task at a la mode is to inspect the property to ascertain its true status. We must actually see aspects of the property, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly are present 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 correct and illustrating the layout of the property. Most importantly, the appraiser identifies any obvious features - or defects - that would affect the value of the house.

Next, after the inspection, we use two or three approaches to determining the value of the property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.

Cost Approach

Here, we pull information on local construction costs, the cost of labor and other factors to determine how much it would cost to replace the property being appraised. This figure commonly sets the upper limit on what a property would sell for. The cost approach is also the least used method.

Sales Comparison

Appraisers can tell you a lot about the subdivisions in which they appraise. They innately understand the value of certain features to the homeowners of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the subject being appraised. By assigning a dollar value to 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 more accurately portray the features of subject.

  • If, for example, the comparable property has a fireplace and the subject doesn't, the appraiser may deduct the value of a fireplace 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.

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. At a la mode, we are experts in knowing the worth of real estate features in Tooele and Tooele County neighborhoods. This approach to value is typically given the most consideration when an appraisal is for a home sale.

Valuation Using the Income Approach

A third way of valuing approach to value is sometimes employed when an area has a measurable number of rental properties. In this scenario, the amount of revenue the property produces is taken into consideration along with income produced by comparable properties to determine the current value.

Arriving at a Value Conclusion

Combining information from all approaches, the appraiser is then ready to put down an estimated market value for the property at hand. Note: While the appraised value is probably the most accurate indication of what a house is worth, it may not be the price at which the property closes. It's not uncommon for prices to be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. But the appraised value is often used as a guideline for lenders who don't want to loan a buyer more money than they could recover in the event they had to put the property on the market again. The bottom line is, an appraiser from a la mode will guarantee you discover the most fair and balanced property value, so you can make profitable real estate decisions.