Understanding Appraisals

A home purchase is the biggest financial decision most might ever encounter. Whether it's a primary residence, a second vacation property or one of many rentals, purchasing real property is an involved financial transaction that requires multiple people working in concert to see it through.

Most of the participants are very familiar. The most recognizable face in the transaction is the real estate agent. Next, the mortgage company provides the financial capital required to fund the exchange. And the title company sees to it that all details of the exchange are completed and that the title is clear to pass 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 is responsible for making sure the real estate is worth the amount being paid? This is where you meet 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 Coman Appraisal Services will ensure, you as an interested party, are informed.

Inspecting the subject property

To determine an accurate status of the property, it's our responsibility to first perform a thorough inspection. We must physically view features, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really are there and are in the shape a typical person would expect them to be. To ensure the stated size of the property has not been misrepresented and convey the layout of the home, the inspection often entails 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 property.

Following the inspection, we use two or three approaches to determining the value of real property: sales comparison and, in the case of a rental property, an income approach.

Cost Approach

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

Analyzing Comparable Sales

Appraisers are intimately familiar with the communities in which they appraise. They thoroughly understand the value of certain features to the homeowners of that area. Then, the appraiser looks up recent transactions in the neighborhood 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.

  • For example, if the comparable 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.
  • However, 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.

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. When it comes to putting a value on features of homes in Jackson and Madison, Coman Appraisal Services is your local authority. The sales comparison approach to value is typically awarded the most consideration when an appraisal is for a home exchange.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - we may use a third way of valuing real estate. In this scenario, the amount of revenue the property generates is taken into consideration along with income produced by nearby properties to determine the current value.

Arriving at a Value Conclusion

Analyzing the data from all approaches, the appraiser is then ready to stipulate an estimated market value for the property at hand. Note: While the appraised value is probably the most reliable indication of what a property is worth, it probably will not be the price at which the property closes. There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust an offer or listing price up or down. But the appraised value is often 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 sell the property again. Here's what it all boils down to, an appraiser from Coman Appraisal Services will help you discover the most fair and balanced property value, so you can make the most informed real estate decisions.