Real Estate Appraisals: A Primer

A home purchase is the most significant transaction many people may ever consider. Whether it's where you raise your family, a second vacation home or an investment, purchasing real property is a complex transaction that requires multiple parties to see it through.

The majority of the people participating are very familiar. The most recognizable person in the transaction is the real estate agent. Next, the mortgage company provides the money necessary to fund the transaction. And ensuring all requirements of the sale are completed and that a clear title transfers to the buyer from the seller 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 value of the real estate is in line with the amount being paid? 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 Biddle Appraisals, LLC will ensure, you as an interested party, are informed.

Appraisals begin with the home inspection

Our first responsibility at Biddle Appraisals, LLC is to inspect the property to ascertain 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 there and are in the shape a typical buyer would expect them to be. To ensure the stated square footage is accurate and document the layout of the property, the inspection often requires creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious features - or defects - that would have an impact on the value of the house.

After the inspection, an appraiser uses two or three approaches to determining the value of real property: paired sales analysis and, in the case of a rental property, an income approach.

Replacement Cost

Here, the appraiser analyzes 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 commonly sets the upper limit on what a property would sell for. The cost approach is also the least used method.

Paired Sales Analysis

Appraisers become very familiar with the communities in which they work. They thoroughly understand the value of specific features to the residents of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the real estate in question. By assigning a dollar value to certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or additional storage space, we adjust the comparable properties so that they more accurately match the features of subject.

  • If, for example, the comparable 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, 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.

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 Biddle Appraisals, LLC, we are experts in knowing the value of particular items in Columbus and Franklin County neighborhoods. The sales comparison approach to value is commonly awarded the most weight when an appraisal is for a real estate sale.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - we may use a third approach to value. In this situation, the amount of income the real estate generates is factored in with income produced by nearby properties to determine the current value.

Coming Up With The Final Value

Examining the data from all applicable approaches, the appraiser is then ready to document an estimated market value for the subject property. Note: While the appraised value is probably the most reliable indication of what a house is worth, it probably will not be the price at which the property closes. There are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust the final price up or down. But the appraised value is typically employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. It all comes down to this, an appraiser from Biddle Appraisals, LLC will help you discover the most fair and balanced property value, so you can make profitable real estate decisions.