What Goes Into an Appraisal?

Acquiring a home can be the biggest financial decision most might ever consider. It doesn't matter if a main residence, a seasonal vacation property or a rental fixer upper, the purchase of real property is a detailed transaction that requires multiple parties to see it through.

The majority of the people involved are very familiar. The real estate agent is the most known person in the exchange. Then, the mortgage company provides the financial capital needed to fund the exchange. And ensuring all areas of the transaction 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 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 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 a la modea will ensure, you as an interested party, are informed.

The inspection is where an appraisal begins

Our first duty at a la modea is to inspect the property to ascertain its true status. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really are there and are in the shape a typical buyer would expect them to be. To ensure the stated size of the property has not been misrepresented and document the layout of the house, the inspection often entails creating a sketch of the floorplan. Most importantly, we look 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: sales comparison and, in the case of a rental property, an income approach.

Replacement Cost

This is where we gather information on local construction costs, labor rates and other factors to calculate how much it would cost to replace the property 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.

Paired Sales Analysis

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 looks up recent sales in the vicinity and finds properties which are 'comparable' to the home in question. By assigning a dollar value to certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or extra storage space, we add or subtract from each comparable's sales price so that they more accurately match the features of subject.

  • If, for example, the comparable property has a storm shelter and the subject does not, the appraiser may deduct the value of a storm shelter 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 modea, we are experts in knowing the worth of real estate features in Herriman. and Salt Lake County neighborhoods. This approach to value is usually given the most importance when an appraisal is for a real estate exchange.

Valuation Using the Income Approach

A third way of valuing a property is sometimes applied when an area has a reasonable number of renter occupied properties. In this scenario, the amount of income the real estate yields is taken into consideration along with other rents in the area for comparable properties to give an indicator of the current value.

Reconciliation

Analyzing the data 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 a property's valueIt'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'. Regardless, 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. Here's what it all boils down to, an appraiser from a la modea will guarantee you attain the most fair and balanced property value, so you can make the most informed real estate decisions.