What Goes Into an Appraisal?

Purchasing a home is the most significant financial decision some might ever consider. Whether it's where you raise your family, an additional vacation property or a rental fixer upper, purchasing real property is a detailed financial transaction that requires multiple people working in concert to make it all happen.

Most people are familiar with the parties having a role in the transaction. The most recognizable entity in the exchange is the real estate agent. Next, the bank provides the financial capital necessary to bankroll the deal. And ensuring all requirements of the transaction are completed and that a clear title passes 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, who 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 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 Hamer Appraisal Services will ensure, you as an interested party, are informed.

Inspecting the subject property

To ascertain an accurate status of the property, it's our duty to first conduct a thorough inspection. We must actually see features, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they truly are there and are in the shape a typical 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, we identify any obvious amenities - or defects - that would have an impact on the value of the property.

Back at the office, 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, the appraiser pulls information on local building costs, the cost of labor and other factors to ascertain how much it would cost to build a property comparable to the one being appraised. This estimate often sets the upper limit on what a property would sell for. The cost approach is also the least used predictor of value.

Analyzing Comparable Sales

Appraisers get to know the subdivisions in which they work. They thoroughly understand the value of specific features to the residents of that area. Then, the appraiser looks up recent sales in the area and finds properties which are 'comparable' to the subject at hand. By assigning a dollar value to certain items such as upgraded appliances, additional bathrooms, additional living area, quality of construction, lot size, we adjust the comparable properties so that they are more accurately in line with the features of subject property.

  • For example, if the comparable has a fireplace and the subject does not, the appraiser may subtract the value of a fireplace from the sales price of the comparable.
  • However, if the subject property has an extra half-bathroom and the comparable does not, the appraiser might add an amount to the comparable property.

Once all necessary adjustments have been made, 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 Merrimac and Essex, Hamer Appraisal Services is your local authority. 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 way of valuing a property is sometimes applied when a neighborhood has a reasonable number of rental properties. In this situation, the amount of revenue the real estate yields is taken into consideration along with other rents in the area for comparable properties to derive the current value.

Reconciliation

Combining information from all approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. It is important to note that while this amount is probably the best indication of what a house is worth, it probably will not be the price at which the property closes. There are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust an offer or listing price up or down. 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. The bottom line is, an appraiser from Hamer Appraisal Services will help you get the most fair and balanced property value, so you can make wise real estate decisions.