What Is an Appraisal?

A home purchase is the most significant financial decision many of us may ever consider. Whether it's a main residence, an additional vacation home or a rental fixer upper, the purchase of real property is an involved financial transaction that requires multiple parties to pull it all off.

It's likely you are familiar with the parties having a role in the transaction. The real estate agent is the most familiar entity in the exchange. Then, the lender provides the financial capital needed to fund the deal. And ensuring all areas of the exchange are completed and that a clear title passes 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 value of the property is consistent with the purchase price? This is where the appraiser comes in. 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 Raider Real Estate Services will ensure, you as an interested party, are informed.

Appraisals begin with the home inspection

Our first duty at Raider Real Estate Services is to inspect the property to determine its true status. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they truly are there and are in the condition a typical person would expect them to be. To make sure the stated size of the property is accurate and describe the layout of the property, the inspection often requires creating a sketch of the floorplan. Most importantly, the appraiser looks for any obvious features - or defects - that would have an impact on the value of the house.

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

Replacement Cost

Here, the appraiser pulls information on local construction costs, the cost of labor and other elements to determine how much it would cost to replace the property being appraised. This value often sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.

Analyzing Comparable Sales

Appraisers become very familiar with the communities in which they appraise. They thoroughly understand the value of certain features to the homeowners of that area. Then, the appraiser researches recent transactions in close proximity to the subject and finds properties which are 'comparable' to the property at hand. Using knowledge of the value of certain items such as upgraded appliances, extra bathrooms, additional living area, quality of construction, lot size, we adjust the comparable properties 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 deduct 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 Raider Real Estate Services, we are an authority when it comes to knowing the worth of real estate features in Loveland and Warren County neighborhoods. The sales comparison approach to value is most often given the most weight when an appraisal is for a home sale.

Valuation Using the Income Approach

A third method of valuing a property is sometimes applied when an area has a reasonable number of rental properties. In this situation, the amount of income the property yields is factored in with income produced by nearby properties to derive the current value.

Arriving at a Value Conclusion

Examining the data from all applicable approaches, the appraiser is then ready to document 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. Depending 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.Regardless, the appraised value is typically used as a guideline for lenders who don't want to loan a buyer more money than they could recover in case they had to put the property on the market again. The bottom line is, an appraiser from Raider Real Estate Services will guarantee you attain the most accurate property value, so you can make the most informed real estate decisions.