Making Sense of the Appraisal Process

Acquiring a home can be the biggest transaction some might ever consider. It doesn't matter if where you raise your family, an additional vacation home or a rental fixer upper, the purchase of real property is a complex transaction that requires multiple people working in concert to pull it all off.

Most people are familiar with the parties having a role in the transaction. The most familiar face in the transaction is the real estate agent. Next, the bank provides the money necessary to finance the deal. And the title company ensures that all requirements of the exchange are completed and that the title is clear to transfer from the seller to the buyer.

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So, what party makes sure the value of the real estate is consistent with the purchase price? In comes the appraiser. We provide an unbiased estimate of what a buyer might expect to pay — or a seller receive — for a parcel of real estate, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Eleven11 Appraisals will ensure, you as an interested party, are informed.

Inspecting the subject property

To determine the true status of the property, it's our responsibility to first conduct 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 really are present and are in the condition a typical buyer would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is accurate and illustrating the layout of the property. Most importantly, the appraiser looks for any obvious features - or defects - that would have an impact on the value of the house.

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

Replacement Cost

Here, we pull information on local building costs, the cost of labor and other elements to figure out how much it would cost to build a property nearly identical to the one being appraised. This estimate usually sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.

Paired Sales Analysis

Appraisers become very familiar with the subdivisions in which they work. They thoroughly understand the value of particular features to the residents of that area. Then, the appraiser looks up recent transactions in the vicinity and finds properties which are 'comparable' to the property being appraised. By assigning a dollar value to certain items such as fireplaces, room layout, appliance upgrades, extra bathrooms or bedrooms, or quality of construction, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject.

  • If, for example, the comparable property has a fireplace and the subject does not, the appraiser may deduct the value of a fireplace from the sales price of the comparable.
  • 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. When it comes to valuing features of homes in Brookings and Brookings, Eleven11 Appraisals can't be beat. The sales comparison approach to value is most often awarded the most consideration when an appraisal is for a real estate sale.

Valuation Using the Income Approach

A third method of valuing real estate is sometimes used when a neighborhood has a reasonable number of renter occupied properties. In this scenario, the amount of income the property generates is taken into consideration along with income produced by nearby properties to determine the current value.

Arriving at a Value Conclusion

Combining information from all applicable approaches, the appraiser is then ready to state an estimated market value for the property in question. The estimate of value on the appraisal report is not necessarily the final sales price even though it is likely the best indication of a property's valueIt's not uncommon for prices to be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. 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. It all comes down to this, an appraiser from Eleven11 Appraisals will help you get the most fair and balanced property value, so you can make profitable real estate decisions.