Understanding Appraisals

Getting real estate can be the biggest financial decision most people will ever consider. Whether it's a main residence, a second vacation home or a rental fixer upper, the purchase of real property is a detailed financial transaction that requires multiple parties to pull it all off.

You're probably familiar with the parties having a role in the transaction. The real estate agent is the most familiar person in the exchange. Next, the lender provides the financial capital needed to finance the deal. And ensuring all aspects of the sale are completed and that the title is clear to transfer 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 makes sure the real estate is worth the purchase price? 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 Slater Real Estate Services will ensure, you as an interested party, are informed.

Appraisals begin with the property inspection

Our first task at Slater Real Estate Services 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, and so on, to ensure they truly are present and are in the condition a reasonable person would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is proper and conveying the layout of the property. Most importantly, we look for any obvious amenities - or defects - that would affect the value of the house.

Following 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.

Cost Approach

Here, the appraiser pulls information on local construction costs, labor rates and other factors to calculate how much it would cost to replace the property being appraised. This value commonly sets the maximum on what a property would sell for. It's also the least used predictor of value.

Analyzing Comparable Sales

Appraisers are intimately familiar with the subdivisions in which they work. They thoroughly understand the value of particular features to the residents of that area. Then, the appraiser looks up recent sales in close proximity to the subject and finds properties which are 'comparable' to the subject being appraised. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, extra bathrooms or bedrooms, or quality of construction, we add or subtract from each comparable's sales price so that they more accurately portray the features of subject property.

  • Say, for example, the comparable property 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.
  • If the subject has an extra half-bathroom and the comparable does not, the appraiser might add an amount to the comparable property.

A true estimate of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. When it comes to valuing features of homes in Windsor and Weld, Slater Real Estate Services can't be beat. The sales comparison approach to value is commonly awarded the most consideration when an appraisal is for a home exchange.

Valuation Using the Income Approach

A third way of valuing a property is sometimes applied when a neighborhood has a reasonable number of rental properties. In this case, the amount of revenue the property produces is taken into consideration along with other rents in the area for comparable properties to give an indicator of the current value.

The Bottom Line

Combining information from all approaches, the appraiser is then ready to state an estimated market value for the subject property. The estimate of value on the appraisal report is not necessarily what's being paid for the property even though it is likely the best indication of a property's valuePrices can always be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. 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 is actually worth. It all comes down to this, an appraiser from Slater Real Estate Services will guarantee you attain the most accurate property value, so you can make the most informed real estate decisions.