An Overview of the Appraisal Process

A home purchase can be the largest transaction many people could ever consider. Whether it's where you raise your family, a seasonal vacation home or an investment, the purchase of real property is a complex financial transaction that requires multiple people working in concert to see it through.

You're probably familiar with the parties taking part in the transaction. The most recognizable person in the transaction is the real estate agent. Next, the lender provides the money required to finance the deal. And ensuring all requirements of the transaction 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 value of the property is in line with the amount being paid? In comes the appraiser. 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 Genesis Appraisal Services will ensure, you as an interested party, are informed.

Inspecting the subject property

Our first responsibility at Genesis Appraisal 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, living areas, etc, to ensure they truly are present and are in the condition a reasonable buyer would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is correct and illustrating the layout of the property. Most importantly, the appraiser identifies any obvious amenities - or defects - that would have an impact on the value of the house.

Following the inspection, an appraiser uses two or three approaches to determining the value of real 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 determine how much it would cost to replace the property being appraised. This value often sets the upper limit on what a property would sell for. It's also the least used predictor of value.

Sales Comparison

Appraisers become very familiar with the subdivisions in which they appraise. They thoroughly understand the value of certain features to the people of that area. Then, the appraiser looks up recent transactions in the vicinity and finds properties which are 'comparable' to the home at hand. Using knowledge of the value of 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 match the features of subject.

For example, if the comparable property has an irrigation system and the subject does not, the appraiser may subtract the value of an irrigation system from the sales price of the comparable.
However, 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 knowing the true value of features of homes in Dayton and Montgomery, Genesis Appraisal Services can't be beat. This approach to value is usually given the most importance when an appraisal is for a real estate purchase.

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 real estate. In this scenario, the amount of income the property yields is taken into consideration along with other rents in the area for comparable properties to determine the current value.

Reconciliation

Examining the data from all 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 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'. Regardless, 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. The bottom line is, an appraiser from Genesis Appraisal Services will help you discover the most accurate property value, so you can make wise real estate decisions.

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