Comprehending Appraisals

Purchasing a house can be the most important financial decision most may ever make. Whether it's where you raise your family, a second vacation home or a rental fixer upper, the purchase of real property is a complex financial transaction that requires multiple people working in concert to pull it all off.

The majority of the participants are very familiar. The real estate agent is the most recognizable face in the transaction. Then, the mortgage company provides the money needed to finance the deal. And ensuring all areas of the transaction are completed and that the title is clear to transfer from the seller to the buyer 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's responsible for making sure the real estate is worth the purchase price? This is where you meet the appraiser. We provide an unbiased opinion 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 Brumbley Appraisals 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 responsibility to first complete a thorough inspection. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed are there and are in the shape a reasonable person would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is correct and conveying the layout of the property. Most importantly, we look for any obvious features - or defects - that would affect the value of the property.

Once the site has been inspected, an appraiser uses two or three approaches to determining the value of real property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.

Replacement Cost

This is where the appraiser uses information on local construction costs, the cost of labor and other factors to determine how much it would cost to construct a property comparable 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 predictor of value.

Paired Sales Analysis

Appraisers are intimately familiar with the communities 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 close proximity to the subject and finds properties which are 'comparable' to the property at hand. Using knowledge of the value of certain items such as upgraded appliances, extra 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.

  • Say, for example, the comparable has an extra half bath that the subject doesn't, the appraiser may subtract the value of that half bath from the sales price of the comparable home.
  • 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 could sell for can only be determined once all differences between the comps and the subject have been evaluated. At Brumbley Appraisals Services, we are experts in knowing the worth of real estate features in Delmar and Wicomico County neighborhoods. The sales comparison approach to value is commonly awarded the most importance when an appraisal is for a home exchange.

Valuation Using the Income Approach

A third way of valuing real estate is sometimes employed when a neighborhood has a measurable number of rental properties. In this scenario, the amount of income the property yields is factored in with income produced by similar properties to determine the current value.

The Bottom Line

Combining information from all applicable approaches, the appraiser is then ready to put down an estimated market value for the property at hand. The estimate of value on the appraisal report is not always the final sales price even though it is likely the best indication of a property's valueDepending on the specific circumstances 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 employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. Here's what it all boils down to, an appraiser from Brumbley Appraisals Services will guarantee you discover the most accurate property value, so you can make profitable real estate decisions.