What Goes Into an Appraisal?

Acquiring real estate can be the largest transaction many people could ever consider. Whether it's where you raise your family, a seasonal vacation home or an investment, the purchase of real property is a complex financial transaction that requires multiple parties to pull it all off.

Practically all the people involved are quite familiar. The real estate agent is the most known entity in the exchange. Next, the mortgage company provides the money needed to fund the transaction. And ensuring all areas of the exchange are completed and that a clear title passes 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, what party makes sure the real estate is worth the amount being paid? This is where the appraiser comes in. 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 Smithson Appraisal will ensure, you as an interested party, are informed.

Appraisals start with the inspection

Our first task at Smithson Appraisal is to inspect the property to ascertain its true status. We must physically view aspects of the property, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they indeed exist and are in the condition a reasonable person would expect them to be. To make sure the stated square footage has not been misrepresented and convey the layout of the property, the inspection often requires creating a sketch of the floorplan. Most importantly, the appraiser looks for any obvious amenities - or defects - that would affect the value of the property.

Following the inspection, an appraiser uses two or three approaches to determining the value of real property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.

Replacement Cost

Here, we analyze information on local building costs, the cost of labor and other factors to determine how much it would cost to construct a property nearly identical to the one being appraised. This figure often sets the maximum on what a property would sell for. It's also the least used predictor of value.

Analyzing Comparable Sales

Appraisers are intimately familiar with the subdivisions in which they work. They innately understand the value of particular 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 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.

  • If, for example, 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 home.
  • If the subject property has an extra half-bathroom and the comparable does not, the appraiser might add an amount to the comparable property.

In the end, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At Smithson Appraisal, we are experts in knowing the worth of particular items in Enid and Garfield County neighborhoods. This approach to value is commonly awarded the most consideration when an appraisal is for a home sale.

Valuation Using the Income Approach

A third method of valuing a house is sometimes applied when an area has a measurable number of renter occupied properties. In this scenario, the amount of income the property yields is factored in with income produced by nearby 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 property at hand. The estimate of value at the bottom of the appraisal report is not always what's being paid for the property even though it is likely the best indication of what a property is worth. Depending on the individual 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.But the appraised value is typically used as a guideline for lenders who don't want to loan a buyer more money than they could get back in the event they had to put the property on the market again. Here's what it all boils down to, an appraiser from Smithson Appraisal will help you discover the most fair and balanced property value, so you can make wise real estate decisions.