Decoding the Appraisal Process

Their home's purchase can be the most significant investment many people could ever make. It doesn't matter if a primary residence, an additional vacation property or an investment, the purchase of real property is a complex 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 most known person in the exchange is the real estate agent. Next, the mortgage company provides the financial capital needed to finance the transaction. The title company makes sure that all areas of the sale are completed and that a clear title passes 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 makes sure the value of the real estate is consistent 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 property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Shamrock Appraisals, Inc. will ensure, you as an interested party, are informed.

Inspecting the subject property

To determine an accurate status of the property, it's our responsibility to first complete a thorough inspection. We must see features hands on, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed exist 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 proper 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 property.

Once the site has been inspected, an appraiser uses 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.

Cost Approach

Here, we gather information on local building costs, the cost of labor and other factors to determine how much it would cost to build a property nearly identical to the one being appraised. This estimate often sets the upper limit on what a property would sell for. It's also the least used method.

Paired Sales Analysis

Appraisers become very familiar with the subdivisions 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 the vicinity and finds properties which are 'comparable' to the real estate in question. By assigning a dollar value to 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 portray the features of subject property.

  • Say, for example, the comparable property 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.
  • 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.

An opinion of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. At Shamrock Appraisals, Inc., we are an authority when it comes to knowing the worth of particular items in Tuscaloosa and Tuscaloosa County neighborhoods. The sales comparison approach to value is typically given the most consideration when an appraisal is for a home exchange.

Valuation Using the Income Approach

A third way of valuing a house is sometimes applied when an area has a reasonable number of renter occupied properties. In this scenario, the amount of income the property generates is taken into consideration along with other rents in the area for comparable properties to determine the current value.

The Bottom Line

Combining information from all approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. Note: While the appraised value is probably the strongest indication of what a house is worth, it may 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. Regardless, the appraised value is often employed 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 Shamrock Appraisals, Inc. will guarantee you discover the most accurate property value, so you can make wise real estate decisions.