Real Estate Appraisals: A Primer

Their home's purchase can be the most important financial decision most might ever make. It doesn't matter if a primary residence, a second vacation property or an investment, purchasing real property is a detailed 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 most known person in the exchange is the real estate agent. Next, the mortgage company provides the financial capital needed to finance the transaction. And ensuring all areas of the transaction are completed and that a clear title transfers from the seller to the buyer 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 real estate is consistent with the purchase price? This is where the appraiser comes in. We provide an unbiased opinion 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 Painter Appraisals and Consulting will ensure, you as an interested party, are informed.

Appraisals begin with the property inspection

Our first responsibility at Painter Appraisals and Consulting is to inspect the property to determine its true status. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they truly exist and are in the shape a typical person would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is proper and conveying the layout of the property. Most importantly, the appraiser identifies any obvious features - or defects - that would have an impact on the value of the property.

Back at the office, 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.

Replacement Cost

Here, we use information on local building costs, labor rates and other elements to ascertain how much it would cost to replace the property being appraised. This figure often sets the maximum on what a property would sell for. The cost approach is also the least used method.

Sales Comparison

Appraisers get to know the subdivisions in which they work. They innately understand the value of certain features to the people of that area. Then, the appraiser researches recent sales in the neighborhood and finds properties which are 'comparable' to the property at hand. 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 adjust the comparable properties so that they are more accurately in line with the features of subject property.

For example, if 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.

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 Painter Appraisals and Consulting, we are an authority in knowing the value of real estate features in Nitro and Kanawha County neighborhoods. This approach to value is usually awarded the most importance when an appraisal is for a home exchange.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - the appraiser may use a third method of valuing a property. In this case, the amount of income the property produces is factored in 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 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 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 often used as a guideline for lenders who don't want to loan a buyer more money than they could get back in the event they had to put the property on the market again. Here's what it all boils down to, an appraiser from Painter Appraisals and Consulting will guarantee you discover the most accurate property value, so you can make profitable real estate decisions.