Home Appraisals: A Primer

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

It's likely you are familiar with the parties having a role in the transaction. The most familiar entity in the transaction is the real estate agent. Next, the lender provides the money needed to bankroll the transaction. And the title company ensures that all details of the exchange 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, what party makes sure the value of the property is consistent with the purchase price? In comes the appraiser. We provide an unbiased opinion of what a buyer might expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from WHD Value will ensure, you as an interested party, are informed.

Inspecting the subject property

Our first duty at WHD Value is to inspect the property to determine its true status. We must see features hands on, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they truly are there and are in the shape a typical buyer would expect them to be. To make sure the stated square footage has not been misrepresented and convey the layout of the house, the inspection often includes creating a sketch of the floorplan. Most importantly, the appraiser looks 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.

Replacement Cost

This is where the appraiser uses information on local building costs, the cost of labor and other factors to ascertain how much it would cost to replace the property being appraised. This estimate often sets the upper limit on what a property would sell for. It's also the least used predictor of value.

Sales Comparison

Appraisers can tell you a lot about the neighborhoods in which they work. They innately understand the value of certain 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 subject at hand. By assigning a dollar value to certain items such as fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, we adjust the comparable properties so that they are more accurately in line with the features of subject property.

  • For example, if the comparable has an irrigation system and the subject doesn't, the appraiser may subtract the value of an irrigation system from the sales price of the comparable.
  • If the subject property has an extra half-bathroom and the comparable does not, the appraiser might add a certain amount 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 valuing features of homes in Warrington and Bucks, WHD Value can't be beat. This approach to value is usually awarded the most importance when an appraisal is for a real estate purchase.

Valuation Using the Income Approach

A third way of valuing a house is sometimes used when a neighborhood has a measurable number of rental properties. In this case, the amount of income the real estate produces is taken into consideration along with income produced by similar properties to derive the current value.

Putting It All Together

Examining the data from all approaches, the appraiser is then ready to stipulate an estimated market value for the property at hand. Note: While this amount is probably the most reliable indication of what a house is worth, it may not be the price at which the property closes. Depending on the specific 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 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 WHD Value will guarantee you discover the most accurate property value, so you can make wise real estate decisions.