Home Appraisals: A Primer

Buying a home can be the biggest financial decision most people will ever make. It doesn't matter if a primary residence, a seasonal vacation property or an investment, purchasing real property is a detailed transaction that requires multiple people working in concert to see it through.

It's likely you are familiar with the parties taking part in the transaction. The most known person in the transaction is the real estate agent. Next, the mortgage company provides the financial capital required to fund the exchange. The title company makes sure that all areas of the transaction are completed and that a clear title passes 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, who's responsible for making sure the property is worth the purchase price? In comes the appraiser. We provide an unbiased opinion 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 Gray Appraisal Services will ensure, you as an interested party, are informed.

Inspecting the subject property

To ascertain an accurate status of the property, it's our duty to first complete a thorough inspection. We must see features first hand, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they indeed are present and are in the shape a reasonable buyer would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is accurate and conveying the layout of the property. Most importantly, the appraiser looks for any obvious features - 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 real property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.

Cost Approach

This is where we analyze information on local building costs, the cost of labor and other elements to derive how much it would cost to replace the property being appraised. This value commonly sets the maximum on what a property would sell for. The cost approach is also the least used method.

Analyzing Comparable Sales

Appraisers get to know the subdivisions in which they appraise. They innately understand the value of particular features to the homeowners of that area. Then, the appraiser researches recent transactions in the neighborhood and finds properties which are 'comparable' to the property in question. By assigning a dollar value to 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 are more accurately in line with the features of subject property.

  • For example, if the comparable property has a storm shelter and the subject does not, the appraiser may deduct the value of a storm shelter 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 a certain amount to the comparable property.

A true estimate of what the subject could 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 Fayetteville and Fayette, Gray Appraisal Services can't be beat. This approach to value is commonly given the most weight when an appraisal is for a home purchase.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - the appraiser may use a third approach to value. In this situation, the amount of income the real estate yields is factored in with other rents in the area for comparable properties to determine the current value.

Coming Up With The Final Value

Combining information from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. Note: While the appraised value is probably the most accurate indication of what a property is worth, it probably will not be the final sales price. There are always mitigating factors such as seller motivation, 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 they could recover in case they had to sell the property again. At the end of the day, an appraiser from Gray Appraisal Services will help you get the most fair and balanced property value, so you can make the most informed real estate decisions.