Understanding Appraisals

Getting a home can be the biggest transaction some of us will ever encounter. It doesn't matter if a primary residence, an additional vacation home or an investment, purchasing real property is a detailed financial transaction that requires multiple people working in concert to make it all happen.

It's likely you are familiar with the parties taking part in the transaction. The most recognizable entity in the transaction is the real estate agent. Then, the bank provides the money needed to fund the deal. And the title company makes sure that all aspects of the transaction are completed and that the title is clear to pass 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 makes sure the value of the real estate is in line with the amount being paid? This is where you meet 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 Haley Appraisal, LLC. 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 conduct a thorough inspection. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they indeed exist and are in the condition a reasonable person would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is accurate and conveying the layout of the property. Most importantly, the appraiser looks for any obvious amenities - or defects - that would affect the value of the house.

Back at the office, we use two or three approaches to determining the value of the property: a paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.

Cost Approach

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

Analyzing Comparable Sales

Appraisers become very familiar with the subdivisions in which they appraise. They innately understand the value of particular features to the people of that area. Then, the appraiser researches recent sales in the area and finds properties which are 'comparable' to the property being appraised. By assigning a dollar value to certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or additional storage space, we adjust the comparable properties so that they more accurately match the features of subject.

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

A true estimate of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. At Haley Appraisal, LLC., we are experts when it comes to knowing the worth of particular items in Clear Lake and Polk County neighborhoods. This approach to value is usually given the most importance when an appraisal is for a home purchase.

Valuation Using the Income Approach

A third method of valuing a house is sometimes used when a neighborhood has a reasonable number of renter occupied properties. In this case, the amount of revenue the property produces is factored in with other rents in the area for comparable properties to give an indicator of 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. Note: While the appraised value is probably the strongest indication of what a house is worth, it may not be the final sales price. Prices can always be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. But the appraised value is often used as a guideline for lenders who don't want to loan a buyer more money than they could recover in case they had to put the property on the market again. It all comes down to this, an appraiser from Haley Appraisal, LLC. will guarantee you get the most accurate property value, so you can make the most informed real estate decisions.