An Overview of the Appraisal Process

Buying real estate is the most significant transaction some might ever make. Whether it's a primary residence, a seasonal vacation property or an investment, purchasing real property is a complex transaction that requires multiple people working in concert to pull it all off.


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It's likely you are familiar with the parties taking part in the transaction. The real estate agent is the most known face in the exchange. Then, the lender provides the money needed to fund the deal. Ensuring all details of the transaction are completed and that the title is clear to pass from the seller to the purchaser is the title company.

So who makes sure the property is consistent with the purchase price? This is where you meet the appraiser. We provide an unbiased estimate of what a buyer might expect to pay - or a seller receive - for a property, where both buyer and seller are informed parties. A professional West Virginia licensed appraiser from Carney Appraisals will ensure you as an interested party are informed.

Inspecting the subject property

To ascertain the true status of the property, it's our responsibility 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 there and are in the condition a reasonable buyer would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is proper and illustrating the layout of the property. Most importantly, we identify any obvious features - or defects - that would affect the value of the house.

Once the site has been inspected, an appraiser employs two or three approaches when determining the value of the property: sales comparison and, in the case of a rental property, an income approach.

Cost Approach

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

Analyzing Comparable Sales

Appraisers become very familiar with the communities in which they appraise. We innately understand the value of specific features to the people of that area. Then, the appraiser researches recent transactions in close proximity to the subject and finds properties which are 'comparable' to the subject in question. By assigning a dollar value to certain items such as square footage, extra bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we adjust the comparable properties so that they are more accurately in line with the features of subject.

If, for example, the comparable property has an extra half bath that the subject does not, the appraiser may subtract the value of that half bath from the sales price of the comparable.
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.

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. This approach to value is commonly awarded the most consideration when an appraisal is for a home sale.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - the appraiser 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 comparable properties to give an indicator of the current value.

Reconciliation

Analyzing the data from all approaches, the appraiser is then ready to document an estimated market value for the property at hand. Note: While this amount is probably the most reliable indication of what a property would sell for in an open market, it may 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 an offer or listing 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 would likely sell for in an open marketplace. It all comes down to this: An appraiser from Carney Appraisals will help you attain the most fair and balanced property value, so you can make wise real estate decisions.