What Goes Into an Appraisal?

Their home's purchase can be the largest investment many of us may ever consider. Whether it's where you raise your family, an additional vacation property or an investment, purchasing real property is a complex transaction that requires multiple people working in concert to make it all happen.

Most of the participants are very familiar. The most familiar entity in the exchange is the real estate agent. Next, the mortgage company provides the financial capital necessary to bankroll the exchange. The title company makes sure that all areas of the sale are completed and that a clear title passes 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, what party is responsible for making sure the property is worth the purchase price? In comes the appraiser. We provide an unbiased opinion of what a buyer might expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Cranwood Appraisals, Inc. will ensure, you as an interested party, are informed.

Appraisals start with the property inspection

Our first responsibility at Cranwood Appraisals, Inc. is to inspect the property to determine its true status. We must actually view features, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they truly exist and are in the condition a reasonable buyer would expect them to be. To make sure the stated size of the property is accurate and describe the layout of the home, the inspection often includes creating a sketch of the floorplan. Most importantly, the appraiser looks for any obvious amenities - or defects - that would have an impact on the value of the house.

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.

Replacement Cost

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

Paired Sales Analysis

Appraisers get to know the neighborhoods in which they appraise. They innately understand the value of particular features to the homeowners of that area. Then, the appraiser looks up recent transactions in the neighborhood and finds properties which are 'comparable' to the real estate being appraised. By assigning a dollar value to certain items such as square footage, extra bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we add or subtract from each comparable's sales price so that they more accurately portray the features of subject property.

  • If, for example, the comparable has a fireplace and the subject doesn't, the appraiser may deduct the value of a fireplace 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 an amount to the comparable property.

After all differences have been accounted for, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. When it comes to valuing features of homes in Novelty and Geauga, Cranwood Appraisals, Inc. can't be beat. This approach to value is usually awarded 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 - we may use an additional approach to value. In this situation, the amount of income the real estate yields is taken into consideration along with other rents in the area for comparable properties to derive the current value.

Coming Up With The Final Value

Analyzing the data from all approaches, the appraiser is then ready to put down an estimated market value for the property in question. It is important to note that while the appraised value is probably the most reliable indication of what a property is worth, it probably will not be the price at which the property closes. There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust the final price up or down. But 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. At the end of the day, an appraiser from Cranwood Appraisals, Inc. will guarantee you attain the most accurate property value, so you can make profitable real estate decisions.