What Goes Into an Appraisal?

Buying real estate is the biggest financial decision some of us might ever make. Whether it's where you raise your family, a seasonal vacation property or an investment, the purchase of real property is a complex financial transaction that requires multiple parties to make it all happen.

Most people are familiar with the parties having a role in the transaction. The real estate agent is the most known entity in the transaction. Then, the mortgage company provides the money necessary to bankroll the transaction. And ensuring all requirements 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, what party makes sure the property is worth the purchase price? In comes the appraiser. We provide an unbiased estimate of what a buyer could expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Bayside Appraisals will ensure, you as an interested party, are informed.

Inspecting the subject property

Our first task at Bayside Appraisals is to inspect the property to ascertain 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 present and are in the shape a reasonable person would expect them to be. To make sure the stated square footage has not been misrepresented and document the layout of the house, the inspection often requires creating a sketch of the floorplan. Most importantly, the appraiser looks for any obvious amenities - or defects - that would affect the value of the property.

Back at the office, 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.

Replacement Cost

Here, the appraiser uses information on local building costs, the cost of labor and other factors to ascertain how much it would cost to build a property nearly identical to the one 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.

Paired Sales Analysis

Appraisers get to know the communities in which they work. They innately understand the value of particular features to the residents of that area. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are 'comparable' to the home at hand. By assigning a dollar value to certain items such as fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, we adjust the comparable properties so that they are more accurately in line with the features of subject.

  • For example, if the comparable property has an extra half bath that the subject does not, the appraiser may subtract the value of that half bath 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.

A valid estimate of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. When it comes to valuing features of homes in Whitney Point and Broome, Bayside Appraisals is your local authority. The sales comparison approach to value is typically awarded the most consideration when an appraisal is for a real estate exchange.

Valuation Using the Income Approach

A third method of valuing real estate is sometimes used when a neighborhood has a reasonable number of rental properties. In this scenario, the amount of income the real estate yields is factored in with income produced by similar properties to derive the current value.

Arriving at a Value Conclusion

Combining information from all applicable approaches, the appraiser is then ready to document an estimated market value for the property in question. Note: While this amount is probably the strongest indication of what a house is worth, it probably will not be the final sales price. Depending on the specific circumstances 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.But the appraised value is typically used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. At the end of the day, an appraiser from Bayside Appraisals will guarantee you discover the most accurate property value, so you can make the most informed real estate decisions.