Comprehending Appraisals

Getting a home is the most important investment many may ever encounter. Whether it's a main residence, an additional vacation property or an investment, the purchase of real property is a complex financial transaction that requires multiple parties to pull it all off.

The majority of the participants are very familiar. The real estate agent is the most recognizable entity in the exchange. Next, the mortgage company provides the financial capital required to fund the transaction. And the title company sees to it that all details of the sale are completed and that a clear title passes from the seller to the buyer.

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 is responsible for making sure the property is worth 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 property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Action Appraisal Group will ensure, you as an interested party, are informed.

The inspection is where an appraisal begins

To ascertain the true status of the property, it's our duty to first conduct a thorough inspection. We must actually see aspects of the property, such as the number of bedrooms and bathrooms, the location, amenities, etc., 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 property, ensuring the square footage is correct 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 to determining the value of the property: sales comparison and, in the case of a rental property, an income approach.

Cost Approach

Here, the appraiser gathers information on local construction costs, the cost of labor and other elements to determine how much it would cost to replace the property being appraised. This estimate usually sets the upper limit on what a property would sell for. The cost approach is also the least used predictor of value.

Paired Sales Analysis

Appraisers become very familiar with the communities in which they appraise. They innately understand the value of certain 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 home in question. 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 adjust the comparable properties so that they are more accurately in line with the features of subject property.

  • Say, for example, 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.
  • However, if the subject has an extra half-bathroom and the comparable does not, the appraiser might add a certain amount to the comparable property.

A valid estimate 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 valuing features of homes in Cincinnati and Hamilton, Action Appraisal Group is second to none. This approach to value is commonly given the most weight when an appraisal is for a real estate exchange.

Valuation Using the Income Approach

A third method of valuing approach to value is sometimes used when a neighborhood has a reasonable number of renter occupied properties. In this situation, the amount of revenue the real estate yields is factored in with income produced by comparable properties to give an indicator of the current value.

Arriving at a Value Conclusion

Combining information from all approaches, the appraiser is then ready to document an estimated market value for the property in question. It is important to note that while the appraised value is probably the best indication of what a house is worth, it probably will not be the price at which the property closes. 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 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. It all comes down to this, an appraiser from Action Appraisal Group will help you attain the most fair and balanced property value, so you can make profitable real estate decisions.