Real Estate Appraisals: A Primer

Their home's purchase can be the most serious investment some people might ever make. It doesn't matter if a primary residence, a second vacation property or an investment, the purchase of real property is a complex transaction that requires multiple people working in concert to make it all happen.

You're probably familiar with the parties taking part in the transaction. The real estate agent is the most known face in the transaction. Then, the mortgage company provides the money needed to fund the deal. 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, what party makes sure the real estate is worth the amount being paid? 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 Paige Appraisal Services, LLC will ensure, you as an interested party, are informed.

The inspection is where an appraisal starts

Our first responsibility at Paige Appraisal Services, LLC is to inspect the property to determine its true status. We must actually view features, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly are there and are in the shape a typical buyer would expect them to be. To make sure the stated size of the property has not been misrepresented and describe the layout of the home, the inspection often entails creating a sketch of the floorplan. Most importantly, the appraiser looks for any obvious features - or defects - that would affect the value of the house.

Once the site has been inspected, an appraiser uses 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.

Cost Approach

Here, the appraiser uses information on local building costs, the cost of labor and other factors to determine how much it would cost to construct a property nearly identical to the one being appraised. This figure commonly sets the maximum on what a property would sell for. It's also the least used predictor of value.

Analyzing Comparable Sales

Appraisers are intimately familiar with the neighborhoods in which they appraise. They innately understand the value of specific features to the residents of that area. Then, the appraiser researches recent transactions in the neighborhood and finds properties which are 'comparable' to the home at hand. By assigning a dollar value to 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 are more accurately in line with the features of subject.

  • If, for example, the comparable has a storm shelter and the subject doesn't, the appraiser may subtract the value of a storm shelter from the sales price of the comparable home.
  • 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 putting a value on features of homes in Upper Marlboro and Prince Georges, Paige Appraisal Services, LLC is your local authority. This approach to value is usually awarded the most consideration when an appraisal is for a home sale.

Valuation Using the Income Approach

A third way of valuing a house is sometimes employed when an area has a measurable number of renter occupied properties. In this case, the amount of income the property generates is factored in with other rents in the area for comparable properties to give an indicator of the current value.

Putting It All Together

Combining information from all approaches, the appraiser is then ready to state an estimated market value for the subject property. Note: While this amount is probably the best indication of what a property is worth, it may not be the final sales price. Depending on the specific 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 often used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. It all comes down to this, an appraiser from Paige Appraisal Services, LLC will guarantee you get the most accurate property value, so you can make the most informed real estate decisions.