Real Estate Appraisals: A Primer

Their home's purchase can be the most serious transaction most of us might ever consider. It doesn't matter if a main residence, an additional vacation property or an investment, purchasing real property is a complex financial transaction that requires multiple people working in concert to pull it all off.

It's likely you are familiar with the parties having a role in the transaction. The most familiar person in the exchange is the real estate agent. Next, the bank provides the financial capital needed to finance the exchange. And the title company makes sure that all aspects of the transaction are completed and that the title is clear to pass to the buyer from the seller.

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 purchase price? This is where the appraiser comes in. We provide an unbiased estimate 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 LaPlante Appraisals, LLC will ensure, you as an interested party, are informed.

Appraisals begin with the property inspection

Our first responsibility at LaPlante Appraisals, LLC is to inspect the property to determine its true status. We must physically view aspects of the property, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they truly are present and are in the shape a reasonable person would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is proper and conveying the layout of the property. Most importantly, the appraiser identifies any obvious features - or defects - that would affect the value of the property.

Once the site has been inspected, an appraiser uses two or three approaches to 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, the cost of labor and other elements to determine how much it would cost to replace the property being appraised. This value commonly sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.

Sales Comparison

Appraisers get to know the neighborhoods in which they work. They thoroughly understand the value of certain features to the homeowners 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. Using knowledge of the value of certain items such as square footage, additional 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.

  • For example, if the comparable 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 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.

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. When it comes to putting a value on features of homes in Phoenix and Maricopa, LaPlante Appraisals, LLC can't be beat. This approach to value is typically given 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 a house. In this situation, the amount of revenue the property yields is factored in with other rents in the area for comparable properties to give an indicator of the current value.

Putting It All Together

Combining information from all approaches, the appraiser is then ready to state an estimated market value for the subject property. It is important to note that while the appraised value is probably the best indication of what a property is worth, it probably will not be the final sales price. 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.Regardless, 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 LaPlante Appraisals, LLC will help you attain the most fair and balanced property value, so you can make profitable real estate decisions.