What Goes Into an Appraisal?

Purchasing a house can be the biggest transaction some of us will ever encounter. It doesn't matter if where you raise your family, an additional vacation property or a rental fixer upper, purchasing real property is a complex transaction that requires multiple people working in concert to make it all happen.

Practically all the participants are quite familiar. The most known entity in the transaction is the real estate agent. Next, the bank provides the financial capital needed to finance the transaction. And the title company ensures that all aspects of the sale are completed and that a clear title transfers from the seller to the buyer.

To learn more about appraising, click here to see a short video or call us today to talk about your specific property.

So, who makes 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 parcel of real estate, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Barrasas Real Estate Appraisals, LLC will ensure, you as an interested party, are informed.

Appraisals begin with the inspection

Our first task at Barrasas Real Estate Appraisals, LLC is to inspect the property to determine its true status. We must physically view features, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed exist and are in the shape a typical buyer would expect them to be. To make sure the stated square footage has not been misrepresented and illustrate the layout of the home, the inspection often requires creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious amenities - or defects - that would have an impact on the value of the house.

Next, after the inspection, we use two or three approaches to determining the value of the property: paired sales analysis and, in the case of a rental property, an income approach.

Replacement Cost

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

Analyzing Comparable Sales

Appraisers can tell you a lot about the communities in which they work. They innately understand the value of certain features to the residents of that area. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are 'comparable' to the real estate in question. By assigning a dollar value to certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or extra storage space, we add or subtract from each comparable's sales price so that they more accurately portray the features of subject.

  • Say, for example, the comparable has an extra half bath that the subject doesn't, the appraiser may subtract the value of that half bath from the sales price of the comparable home.
  • If the subject has an extra half-bathroom and the comparable does not, the appraiser might add a certain amount to the comparable property.

A valid estimate of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. At Barrasas Real Estate Appraisals, LLC, we are an authority when it comes to knowing the value of particular items in Valparaiso and Porter County neighborhoods. This approach to value is commonly given the most importance when an appraisal is for a home sale.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - we may use an additional way of valuing real estate. In this scenario, the amount of revenue the property produces is factored in with income produced by similar properties to determine the current value.

Arriving at a Value Conclusion

Examining the data from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. The estimate of value on the appraisal report is not necessarily the final sales price even though it is likely the best indication of what a property is worth. 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 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 Barrasas Real Estate Appraisals, LLC will guarantee you discover the most fair and balanced property value, so you can make the most informed real estate decisions.