What Is an Appraisal?

A residential real estate appraisal is a detailed property valuation assessment. Buying or selling a home is one of the most important financial transactions that you will make in connection with establishing your financial security. Although real estate agents are the most well-known professionals involved in the process; banks, mortgage brokers, title companies and real estate appraisers also play essential roles.

A real estate appraiser's purpose is to ensure that the property is being sold at an accurate price. For sellers, this means that they are receiving a price that is comparable to similar properties within a few miles of it's location. For buyers, this ensures that they are paying the amount that the property is worth. For mortgage professionals, an accurate appraisal is essential to the lending process as their business is based on making sound investments.

To learn more about appraising, click here to see a short video.
 Contact us at 303.916.7307 or bizappraisal@msn.com 
to talk about your specific property.


What to Expect: The Appraisal Process

The appraisal process starts with research. 
Appraisers must gather:

  • Listing Information
  • County Records
  • Comparable properties that have sold within six months.
  • Comparable properties currently listed or under contract.
  • Other documents that might affect the value of the property.

 

Then, an inspection is performed to assess the following:

  • Location
  • Site Size
  • Finished and Unfinished Square Footage
  • Number and Type of Rooms
  • Condition
  • Neighborhood Amenities
  • Interior and Exterior Features

After the inspection, the appraiser is required to complete a sketch of the property layout.

Then the appraiser determines the best of three standardized approaches to determine the value of the property.
These are called the Sales Comparison Approach, the Cost Approach, and the Income Approach (for properties that provide an income stream for the owner).

Cost Approach

Here, the appraiser uses information on local building costs, the cost of labor and other factors to figure out how much it would cost to construct a property similar to the one being appraised. This figure usually sets the maximum on what a property would sell for. The cost approach is also the least used predictor of value.

Sales Comparison

A professional real estate appraiser is extremely familiar with the communities in which they work. They are experts in the value of the features of the properties within a certain area. They write a detailed analysis of the subject property in comparison with similar properties in the area.

Some of the features that they analyze are:
- Flooring
- Countertops
 - Paint
 - Cabinetry
 - Lighting
 - Doors
 - Sinks
 - Bathtubs
 - Showers
 - Appliances
 - Fixtures

 

The Income Approach

In the case of income producing properties - rental houses for example - the amount of income the real estate produces is taken into consideration along with other rents in the area for comparable properties to determine the current value.

The Bottom Line

The appraiser uses all of this information and possibly more to assign a market value for the subject property. It is important to note that this may not be the final sales price. Some factors that may affect the final sales price are:

  • Buyers and Sellers Urgency
  • Market Conditions
  • Availability

The appraised value is typically used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. At BIZ Appraisal Company, we use all of our experience and expertise so that you can make the most informed real estate decisions.