Understanding Appraisals

Acquiring a house can be the largest transaction some may ever make. Whether it's a main residence, a seasonal vacation property or one of many rentals, the purchase of real property is an involved financial transaction that requires multiple parties to see it through.

It's likely you are familiar with the parties having a role in the transaction. The real estate agent is the most recognizable entity in the exchange. Then, the mortgage company provides the money required to bankroll the transaction. The title company makes sure that all areas of the transaction are completed and that the title is clear to transfer from the seller to the purchaser.

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 is responsible for making sure the real estate is worth the amount being paid? In comes the appraiser. We provide an unbiased estimate of what a buyer might 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 Complete Home Appraisals LLC will ensure, you as an interested party, are informed.

The inspection is where an appraisal starts

Our first responsibility at Complete Home Appraisals LLC is to inspect the property to ascertain its true status. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really are there and are in the condition a typical buyer would expect them to be. To ensure the stated size of the property is accurate and describe the layout of the house, the inspection often requires creating a sketch of the floorplan. Most importantly, the appraiser looks for any obvious features - or defects - that would affect the value of the house.

Back at the office, we use two or three approaches to determining the value of the property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.

Replacement Cost

This is where we use information on local construction costs, labor rates and other elements to calculate how much it would cost to replace the property being appraised. This estimate usually sets the maximum on what a property would sell for. It's also the least used method.

Sales Comparison

Appraisers are intimately familiar with the communities in which they work. They thoroughly understand the value of particular 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 home in question. By assigning a dollar value to certain items such as upgraded appliances, additional bathrooms, additional living area, quality of construction, lot size, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject property.

  • 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 home.
  • But, in the case where the subject has something such as an extra half bath that a comparable doesn't have, the appraiser might add the value of that bath 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 Complete Home Appraisals LLC, we are an authority in knowing the value of particular items in Saint Peters and Saint Charles County neighborhoods. This approach to value is typically given the most importance when an appraisal is for a home purchase.

Valuation Using the Income Approach

A third method of valuing approach to value is sometimes employed when an area has a measurable number of renter occupied properties. In this scenario, the amount of income the property generates is factored in with other rents in the area for comparable properties to determine the current value.

Coming Up With The Final Value

Combining information from all applicable approaches, the appraiser is then ready to state an estimated market value for the subject property. The estimate of value at the bottom of the appraisal report is not necessarily 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 used 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. It all comes down to this, an appraiser from Complete Home Appraisals LLC will guarantee you discover the most accurate property value, so you can make the most informed real estate decisions.