Understanding Appraisals
What is a Real Estate Appraisal?
At its core, an appraisal is an unbiased, professional estimate of what a buyer would reasonably pay and a seller would accept for a property. It is informed by the expertise of a licensed, certified appraiser who analyzes the property and the local market.
While the final appraised value is a strong guideline used by lenders to approve mortgages, it's important to remember that the final sale price can still vary due to negotiations and shifting market conditions.
How the Process Works
The Physical Inspection
The process begins with an on-site visit. The appraiser inspects the home's condition, counts bedrooms and bathrooms, evaluates the layout, and draws a sketch to confirm the exact square footage.
Neighborhood & Market Research
Appraisers know local neighborhoods intimately. We analyze school zones, traffic patterns, local amenities, and specific neighborhood features that directly affect property values.
Approaches to Value
Back at the office, the appraiser determines the value using one or more standardized approaches (Sales Comparison, Cost, or Income). This involves deep research into recent comparable sales.
Final Opinion of Value
All data is reconciled into a final report. This comprehensive document details the property, the market, the comparable sales used, and the final opinion of value.
The Three Valuation Approaches
Depending on the property type, an appraiser will use one or more of these methods to determine value.
Sales Comparison Approach
The most common method for residential real estate. It involves finding recent sales of similar properties (“comps”) in the same area and making adjustments for differences like fireplaces, extra bathrooms, or condition.
Cost Approach
Based on how much it would cost to build a replica of the home from scratch today. The appraiser calculates land value plus the cost of construction, minus physical depreciation. Often used for new construction or unique homes.
Income Approach
Have more questions?
We’re happy to discuss the appraisal process with you and determine the best service for your needs.