Real Property Appraisals: A Primer

Buying real estate can be the most significant financial decision some will ever encounter. It doesn't matter if a primary residence, a second vacation property or a rental fixer upper, purchasing real property is a complex transaction that requires multiple parties to make it all happen.

You're probably familiar with the parties taking part in the transaction. The most recognizable entity in the exchange is the real estate agent. Then, the lender provides the money necessary to finance the deal. And the title company sees to it that all requirements of the transaction are completed and that the title is clear to transfer to the buyer from the seller.

To learn more about appraising, click here to see a short video or call us today to talk about your specific property.

So, who's responsible for making sure the value of the real estate is in line with the amount being paid? In comes the appraiser. We provide an unbiased estimate 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 Burrel Adkins Real Estate & Appraisals will ensure, you as an interested party, are informed.

Inspecting the subject property

To determine the true status of the property, it's our duty to first complete a thorough inspection. We must see features first hand, 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 person would expect them to be. To ensure the stated square footage has not been misrepresented and illustrate the layout of the property, the inspection often requires creating a sketch of the floorplan. Most importantly, we look for any obvious amenities - or defects - that would have an impact on the value of the property.

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

Cost Approach

This is where the appraiser analyzes information on local construction costs, the cost of labor and other factors to figure out how much it would cost to build a property similar to the one being appraised. This estimate often sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.

Analyzing Comparable Sales

Appraisers get to know the neighborhoods in which they appraise. They thoroughly understand the value of particular features to the people of that area. Then, the appraiser researches recent transactions in close proximity to the subject and finds properties which are 'comparable' to the real estate being appraised. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, we add or subtract from each comparable's sales price so that they more accurately portray the features of subject property.

For example, if 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 home.
However, 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 true estimate of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. At Burrel Adkins Real Estate & Appraisals, we are experts when it comes to knowing the value of particular items in Chillicothe and Ross County neighborhoods. This approach to value is usually given the most consideration 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 an additional method of valuing a property. In this case, the amount of revenue the real estate yields is taken into consideration along with income produced by comparable properties to determine the current value.

Arriving at a Value Conclusion

Examining the data from all applicable 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 house is worth, it may not be the price at which the property closes. 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 typically employed as a guideline for lenders who don't want to loan a buyer more money than they could get back in case they had to put the property on the market again. The bottom line is, an appraiser from Burrel Adkins Real Estate & Appraisals will guarantee you discover the most accurate property value, so you can make the most informed real estate decisions.