A Description of the Appraisal Process

A home purchase is the most serious transaction most will ever consider. It doesn't matter if a main residence, a second vacation property or one of many rentals, purchasing real property is an involved transaction that requires multiple parties to make it all happen.

It's likely you are familiar with the parties taking part in the transaction. The most known entity in the exchange is the real estate agent. Next, the bank provides the money required to finance the deal. And ensuring all aspects of the sale are completed and that the title is clear to pass 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 is 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 Albers Appraising Company will ensure, you as an interested party, are informed.

Inspecting the subject property

Our first duty at Albers Appraising Company is to inspect the property to determine 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 indeed exist and are in the shape a typical buyer would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is correct and conveying the layout of the property. Most importantly, we identify any obvious amenities - or defects - that would affect the value of the house.

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

Replacement Cost

Here, we pull information on local building costs, labor rates and other elements to derive how much it would cost to construct a property similar to the one being appraised. This estimate commonly sets the upper limit on what a property would sell for. It's also the least used method.

Paired Sales Analysis

Appraisers become very familiar with the neighborhoods in which they appraise. They innately understand the value of specific features to the residents of that area. Then, the appraiser researches recent sales in the neighborhood and finds properties which are 'comparable' to the home being appraised. 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.

  • For example, if the comparable property 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.
  • 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.

An opinion of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. At Albers Appraising Company, we are an authority in knowing the worth of real estate features in Lake Ozark and Camden County neighborhoods. The sales comparison approach to value is most often given the most weight when an appraisal is for a home purchase.

Valuation Using the Income Approach

A third way of valuing approach to value is sometimes employed when an area has a measurable number of rental properties. In this scenario, the amount of income the property generates is factored in with other rents in the area for comparable properties to determine the current value.

Putting It All Together

Examining the data from all approaches, the appraiser is then ready to put down an estimated market value for the property in question. The estimate of value at the bottom of the appraisal report is not necessarily what's being paid for the property even though it is likely the best indication of what a property is worth. It's not uncommon for prices to be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. But the appraised value is often used 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 Albers Appraising Company will help you get the most fair and balanced property value, so you can make the most informed real estate decisions.