Home Appraisals: A Primer

Getting a home can be the biggest investment some may ever consider. Whether it's a main residence, a seasonal vacation property or a rental fixer upper, the purchase of real property is a complex transaction that requires multiple parties to pull it all off.


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

Most people are familiar with the parties having a role in the transaction. The real estate agent is the most recognizable person in the exchange. Then, the bank provides the financial capital needed to fund the deal. Ensuring all details of the sale are completed and that a clear title transfers to the buyer from the seller is the title company.

So what party makes sure the real estate is consistent with the amount being paid? In comes the appraiser. 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 professional Colorado licensed appraiser from Accurate Valuation LLC will ensure you as an interested party are informed.

Inspecting the subject property

To determine an accurate status of the property, it's our responsibility to first perform a thorough inspection. We must see features first hand, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed are present and are in the condition a reasonable buyer would expect them to be. The inspection often includes a sketch of the floor plan, ensuring the square footage is proper and conveying the layout of the property. Most importantly, we look for any obvious features - or defects - that would have an impact on the value of the house.

Back at the office, we use two or three approaches when determining the value of real property: sales comparison and, in the case of a rental property, an income approach.

Replacement Cost

This is where the appraiser pulls information on local building costs, labor rates and other elements to calculate how much it would cost to construct a property nearly identical to the one being appraised. This figure usually sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.

Sales Comparison

Appraisers get to know the subdivisions in which they work. We thoroughly understand the value of specific features to the homeowners of that area. Then, the appraiser researches recent transactions in close proximity to the subject and finds properties which are 'comparable' to the home in question. 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 are more accurately in line with the features of subject property.

Say, for example, the comparable property has a storm shelter and the subject doesn't, the appraiser may deduct the value of a storm shelter 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.

Once all necessary adjustments have been made, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. The sales comparison approach to value is usually awarded the most importance when an appraisal is for a home sale.

Valuation Using the Income Approach

A third method of valuing a house is sometimes applied when a neighborhood has a measurable number of rental properties. In this scenario, the amount of revenue the property generates is factored in with income produced by neighboring properties to determine the current value.

Arriving at a Value Conclusion

Combining information from all approaches, the appraiser is then ready to state an estimated market value for the property in question. The estimate of value at the bottom of the appraisal report is not necessarily the final sales price even though it is likely the best indication of what a property could sell for in an open market. 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. 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 would likely sell for in an open marketplace. Here's what it all boils down to: An appraiser from Accurate Valuation LLC will guarantee you attain the most fair and balanced property value, so you can make profitable real estate decisions.