Home Appraisals: A Primer

Getting a house can be the largest financial decision some of us might ever make. Whether it's where you raise your family, a second vacation property or an investment, purchasing real property is a complex transaction that requires multiple parties to make it all happen.

Most of the participants are very familiar. The most recognizable entity in the exchange is the real estate agent. Next, the bank provides the financial capital required to fund the exchange. And ensuring all areas of the transaction 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, who makes sure the property is worth 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 CF Appraisal And Consulting Group will ensure, you as an interested party, are informed.

Appraisals start with the property inspection

To ascertain the true status of the property, it's our duty to first conduct a thorough inspection. We must physically see aspects of the property, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they indeed are present and are in the condition a reasonable buyer would expect them to be. To make sure the stated size of the property has not been misrepresented and convey the layout of the property, the inspection often entails creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious amenities - or defects - that would have an impact on the value of the house.

Once the site has been inspected, an appraiser uses two or three approaches to determining the value of real property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.

Cost Approach

Here, the appraiser uses information on local building costs, labor rates and other elements to calculate how much it would cost to construct a property similar to the one being appraised. This figure commonly sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.

Sales Comparison

Appraisers are intimately familiar with the communities in which they work. They thoroughly understand the value of specific features to the people of that area. Then, the appraiser looks up recent sales in the neighborhood and finds properties which are 'comparable' to the property being appraised. Using knowledge of the value of certain items such as square footage, additional 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 more accurately match the features of subject property.

  • Say, for example, the comparable has a fireplace and the subject doesn't, the appraiser may subtract the value of a fireplace from the sales price of the comparable.
  • But, 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.

An opinion 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 Watkinsville and Oconee, CF Appraisal And Consulting Group is second to none. The sales comparison approach to value is typically awarded the most weight when an appraisal is for a home exchange.

Valuation Using the Income Approach

A third way of valuing a house is sometimes used when an area has a measurable number of rental properties. In this case, the amount of income the property generates is taken into consideration along with other rents in the area for comparable properties to derive the current value.

Putting It All Together

Combining information from all approaches, the appraiser is then ready to put down an estimated market value for the subject property. The estimate of value on 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. There are always mitigating factors such as the seller's desire to get out of the property, 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 recover in case they had to sell the property again. At the end of the day, an appraiser from CF Appraisal And Consulting Group will help you get the most accurate property value, so you can make wise real estate decisions.