Real Property Appraisal: A primer

A home purchase is the most serious investment most people could ever make. It doesn’t matter if it’s where you raise your family, a second vacation property or one of many rentals, purchasing real property is a detailed transaction that requires multiple parties to make it all happen.

The majority of the parties involved are very familiar. The most known face in the transaction is the real estate agent. Next, the bank provides the financial capital needed to bankroll the transaction. Ensuring all aspects of the transaction are completed and that the title is clear to pass from the seller to the buyer is the title company.

So what party is responsible for making sure the property is consistent with the purchase price?   In comes the appraiser.   We provide an unbiased estimate of what a buyer could expect to pay – or a seller receive – for a parcel of real estate, where both buyer and seller are informed parties. A professional Pennsylvania certified appraiser from Home Appraising Group will ensure you as an interested party are informed.

INSPECTING THE SUBJECT PROPERTY

Our first duty at Home Appraising Group is to inspect the property to ascertain its true status. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly exist and are in the condition a typical buyer would expect them to be. To make sure the stated size of the property is accurate and illustrate the layout of the property, the inspection often includes creating a sketch of the floor plan. Most importantly, we look for any obvious amenities – or defects – that would affect the value of the property.
Once the site has been inspected, we use two or three approaches when determining the value of real property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.

ANALYZING COMPARABLE SALES

Appraisers get to know the communities in which they work. We thoroughly understand the value of particular features to the people of that area. Then, the appraiser researches recent transactions in the neighborhood and finds properties which are ‘comparable’ to the property in question. Using knowledge of the value of certain items such as square footage, additional bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we add or subtract from each comparable’s sales price so that they are more accurately in line with the features of subject property.

  • If, for example, the comparable has an extra half bath that the subject doesn’t, the appraiser may deduct the value of that half bath from the sales price of the comparable.
  • But, in the case where the subject has something such as an extra half bath that a comparable doesn’t have, the appraiser might add the value of that bath to the comparable property.

At Home Appraising Group, we are experts when it comes to knowing the value of real estate features Pennsylvania. This approach to value is commonly awarded the most consideration when an appraisal is for a home purchase.

COST
APPROACH

Here, the appraiser analyzes information on local building costs, the cost of labor and other factors to ascertain how much it would cost to build 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.

VALUATION USING THE INCOME APPROACH

A third method of valuing a house is sometimes used when an area has a reasonable number of rental properties. In this situation, the amount of revenue the property yields is factored in with income produced by neighboring properties to determine the current value.

ARRIVING AT VALUE CONCLUSION

Combining information from all approaches, the appraiser is then ready to stipulate an estimated market value for the property in question. The estimate of value at the bottom of the appraisal report is not necessarily the final sales price even though it is likely the best indication of what a property could sell for in an open market. Depending on the specific 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 often used as a guideline for lenders who don’t want to loan a buyer more money than they could recover in the event they had to sell the property again. At the end of the day: An appraiser from Home Appraising Group will guarantee you get the most fair and balanced property value, so you can make wise real estate decisions.