An Overview of the Appraisal Process

A home purchase can be the most important transaction most of us will ever make. It doesn't matter if it's a main residence, an additional vacation home or one of many rentals, purchasing real property is a complex financial transaction that requires multiple parties to pull it all off.


	To learn more about appraising, click here to see a short video or call us today to talk about your specific property.

It's likely you are familiar with the parties taking part in the transaction. The real estate agent is the most recognizable person in the transaction. Next, the bank provides the money needed to finance the deal. Ensuring all aspects of the exchange are completed and that a clear title transfers from the seller to the buyer is the title company.

So who's responsible for making sure the value of the real estate is consistent with the purchase price? This is where the appraiser comes in. The appraiser provides 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 professional appraisal from Heather E. Baggerly-Lucas, Certified Residential Real Estate Appraiser will ensure you as an interested party are informed.

The inspection is where an appraisal begins

The appraisers first responsibility is to inspect the property to ascertain its true status. The appraiser must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, living areas, etc., to ensure they indeed exist and are in the shape a typical person would expect them to be. The inspection often includes a sketch of the floor plan, ensuring the square footage is accurate and conveying the layout of the property. Most importantly, the appraiser identifies any obvious features - or defects - that would have an impact on the value of the house.

Next, after the inspection, the appraiser will use two or three approaches when determining the value of the property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.

Cost Approach

This is where the appraiser gathers information on local building costs, labor rates and other factors to figure out how much it would cost to replace the property being appraised. This estimate often sets the upper limit on what a property would sell for. The cost approach is also the least used method.

Paired Sales Analysis

Appraisers get to know the neighborhoods in which they appraise and understand the value of specific features to the homeowners of that area. Then, the appraiser researches recent sales in the area and finds properties which are 'comparable' to the property in question. By assigning a dollar value to certain items such as square footage, extra bathrooms, hardwood floors, fireplaces or view lots (just to name a few), the appraiser will adjust the comparable properties so that they are more accurately in line with the features of subject.

If, for example, the comparable property has a garage and the subject doesn't, the appraiser may deduct the value of a garage from the sales price of the comparable.
However, if the subject property has an extra half-bathroom and the comparable does not, the appraiser might add an amount to the comparable property.

When it comes to associating a value with features of homes in Wake County, Heather E. Baggerly-Lucas can't be beat. This approach to value is typically awarded the most weight when an appraisal is for a real estate sale.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - the appraiser may use a third method of valuing real estate. In this case, the amount of revenue the real estate generates is factored in with income produced by comparable properties to derive the current value.

Arriving at a Value Conclusion

Combining information from all applicable approaches, the appraiser is then ready to put down an estimated market value for the property at hand. It is important to note that while the appraised value is probably the most reliable indication of what a property would sell for in an open market, it probably will 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'. Regardless, the appraised value is often used as a guideline for lenders who don't want to loan a buyer more money than they could get back in case they had to put the property on the market again. Here's what it all boils down to: An appraisal from Heather E. Baggerly-Lucas will help you get the most accurate property value, so you can make profitable real estate decisions.