What Goes Into an Appraisal?

Purchasing a house is the largest financial decision some people may ever encounter. It doesn't matter if a primary residence, a seasonal vacation home or an investment, purchasing real property is an involved financial transaction that requires multiple parties to make it all happen.

Most people are familiar with the parties taking part in the transaction. The most recognizable entity in the exchange is the real estate agent. Next, the bank provides the financial capital required to fund the transaction. And ensuring all requirements of the sale are completed and that a clear title transfers to the buyer from the seller is the title company.

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So, who makes sure the real estate is worth the amount being paid? 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 Eastern Appraisal Services, Inc. will ensure, you as an interested party, are informed.

Inspecting the subject property

Our first duty at Eastern Appraisal Services, Inc. is to inspect the property to ascertain its true status. We must physically view aspects of the property, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they indeed are there and are in the shape a typical buyer would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is accurate and conveying the layout of the property. Most importantly, we identify any obvious amenities - or defects - that would affect the value of the house.

Following the inspection, an appraiser uses two or three approaches to determining the value of real property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.

Cost Approach

Here, the appraiser analyzes information on local construction costs, the cost of labor and other elements to determine how much it would cost to replace the property being appraised. This figure commonly sets the upper limit on what a property would sell for. It's also the least used method.

Sales Comparison

Appraisers become very familiar with the communities in which they appraise. They thoroughly understand the value of particular features to the residents of that area. Then, the appraiser researches recent transactions in the vicinity and finds properties which are 'comparable' to the real estate in question. By assigning a dollar value to certain items such as upgraded appliances, extra bathrooms, additional living area, quality of construction, lot size, we adjust the comparable properties so that they are more accurately in line with the features of subject property.

  • For example, if the comparable property has a fireplace and the subject does not, the appraiser may subtract the value of a fireplace from the sales price of the comparable.
  • However, if the subject property has an extra half-bathroom and the comparable does not, the appraiser might add an amount to the comparable property.

A valid estimate of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. At Eastern Appraisal Services, Inc., we are an authority in knowing the value of particular items in Cranston and Providence County neighborhoods. The sales comparison approach to value is usually given the most weight when an appraisal is for a real estate sale.

Valuation Using the Income Approach

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

Reconciliation

Examining the data from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the property at hand. The estimate of value on the appraisal report is not always the final sales price even though it is likely the best indication of what a property is worth. Depending on the individual 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 typically employed as a guideline for lenders who don't want to loan a buyer more money than they could get back in the event they had to put the property on the market again. At the end of the day, an appraiser from Eastern Appraisal Services, Inc. will help you discover the most fair and balanced property value, so you can make profitable real estate decisions.