Real Estate Appraisals: A Primer

A home purchase is the most significant financial decision many people may ever encounter. It doesn't matter if a primary residence, an additional vacation property or one of many rentals, purchasing real property is a complex transaction that requires multiple parties to pull it all off.

Most people are familiar with the parties taking part in the transaction. The most known entity in the exchange is the real estate agent. Next, the bank provides the financial capital required to fund the transaction. The title company ensures that all aspects of the sale are completed and that the title is clear to pass to the buyer from the seller.

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So, who makes sure the value of the property is consistent with the amount being paid? This is where you meet the appraiser. We provide an unbiased opinion 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 Landolt Appraisals, LLC will ensure, you as an interested party, are informed.

The inspection is where an appraisal begins

Our first responsibility at Landolt Appraisals, LLC is to inspect the property to ascertain its true status. We must actually see aspects of the property, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really exist and are in the condition a reasonable buyer would expect them to be. The inspection often includes a sketch of the floorplan, ensuring the square footage is correct 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.

Following the inspection, an appraiser uses two or three approaches to determining the value of the property: a sales comparison, a cost approach (analyzing replacement cost), and an income approach when rental properties are prevalent.

Analyzing Comparable Sales

Appraisers can tell you a lot about the subdivisions in which they work. They innately understand the value of specific features to the homeowners of that area. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are 'comparable' to the property 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 adjust the comparable properties so that they more accurately portray the features of subject.
For example, if the comparable has an extra half bath that the subject does not, the appraiser may deduct the value of that half bath from the sales price of the comparable.
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.
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. When it comes to valuing features of homes in Larsen and Winnebago, Landolt Appraisals, LLC is second to none. This approach to value is usually awarded the most importance when an appraisal is for a home sale.

Replacement Cost

Here, we analyze information on local building costs, the cost of labor and other factors to calculate how much it would cost to construct a property similar to the one being appraised. This figure often sets the upper limit on what a property would sell for.

Valuation Using the Income Approach

A third method of valuing a house is sometimes applied when a neighborhood has a reasonable number of rental properties. In this case, the amount of revenue the property generates is taken into consideration along with income produced by similar properties to derive the current value.

Putting It All Together

Combining information from all applicable approaches, the appraiser is then ready to state an estimated market value for the subject property. It is important to note that while the appraised value is probably the most accurate indication of what a property is worth, it may not be the price at which the property closes. It'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. At the end of the day, an appraiser from Landolt Appraisals, LLC will guarantee you attain the most accurate property value, so you can make the most informed real estate decisions.