Understanding Appraisals

Their home's purchase is the most important financial decision many of us could ever encounter. Whether it's where you raise your family, a second vacation property or an investment, purchasing real property is an involved financial transaction that requires multiple people working in concert to see it through.

You're likely to be familiar with the parties having a role in the transaction. The real estate agent is the most known person in the exchange. Then, the bank provides the financial capital required to fund the deal. And ensuring all aspects of the exchange are completed and that the title is clear to transfer from the seller to the purchaser 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 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 Race Appraisal Services, LLC will ensure, you as an interested party, are informed.

The inspection is where an appraisal begins

Our first task at Race Appraisal Services, LLC is to inspect the property to determine its true status. We must see features first hand, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they truly are present and are in the shape a typical buyer would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is correct and conveying the layout of the property. Most importantly, we look for any obvious amenities - or defects - that would affect the value of the property.

Back at the office, an appraiser uses 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

This is where the appraiser uses information on local construction costs, the cost of labor and other factors to determine how much it would cost to construct a property similar to the one being appraised. This value often sets the maximum on what a property would sell for. It's also the least used method.

Sales Comparison

Appraisers are intimately familiar with the subdivisions in which they appraise. They innately understand the value of particular features to the people of that area. Then, the appraiser looks up recent transactions in the area and finds properties which are 'comparable' to the subject in question. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, extra 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.

For example, if the comparable property has a fireplace and the subject doesn't, the appraiser may subtract the value of a fireplace from the sales price of the comparable.
However, if the subject property has an extra half-bathroom and the comparable does not, the appraiser might add an amount 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. At Race Appraisal Services, LLC, we are experts in knowing the value of particular items in East Longmeadow and Hampden County neighborhoods. This approach to value is typically awarded the most consideration when an appraisal is for a home sale.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - we may use an additional method of valuing real estate. In this scenario, the amount of income the real estate yields is factored in with income produced by nearby properties to give an indicator of the current value.

Reconciliation

Analyzing the data from all applicable approaches, the appraiser is then ready to document an estimated market value for the subject property. It is important to note that while the appraised value is probably the strongest indication of what a property is worth, it may not be the final sales price. There are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust an offer or listing price up or down. But 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. Here's what it all boils down to, an appraiser from Race Appraisal Services, LLC will help you discover the most fair and balanced property value, so you can make profitable real estate decisions.

Got a Question?

Do you have a question relating to real estate appraisals? We can help. Simply fill out the form below and we'll contact you with the answer, with no obligation to you. We guarantee your privacy.