An Overview of the Appraisal Process

Acquiring real estate can be the most significant investment most will ever make. It doesn't matter if a primary residence, a seasonal vacation property or a rental fixer upper, the purchase of real property is an involved financial transaction that requires multiple parties to make it all happen.

Most people are familiar with the parties having a role in the transaction. The real estate agent is the most known entity in the exchange. Then, the bank provides the money required to finance the exchange. And ensuring all details of the exchange are completed and that the title is clear to pass to the buyer from the seller is the title company.

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

So, who makes sure the real estate is worth the purchase price? This is where the appraiser comes in. 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 Central Alabama Appraisal will ensure, you as an interested party, are informed.

Inspecting the subject property

To determine an accurate status of the property, it's our duty to first perform a thorough inspection. We must actually view aspects of the property, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they indeed are there and are in the shape a reasonable person would expect them to be. To make sure the stated square footage has not been misrepresented and illustrate the layout of the house, the inspection often includes creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious features - or defects - that would have an impact on the value of the house.

Back at the office, an appraiser uses two or three approaches to determining the value of the property: sales comparison and, in the case of a rental property, an income approach.

Cost Approach

Here, we analyze information on local construction costs, labor rates and other factors to ascertain how much it would cost to replace the property being appraised. This value commonly sets the upper limit on what a property would sell for. The cost approach is also the least used predictor of value.

Analyzing Comparable Sales

Appraisers become very familiar with the communities in which they work. They innately understand the value of specific features to the people of that area. Then, the appraiser looks up recent sales in the neighborhood and finds properties which are 'comparable' to the subject at hand. By assigning a dollar value to certain items such as upgraded appliances, additional bathrooms, additional living area, quality of construction, lot size, we add or subtract from each comparable's sales price so that they more accurately match the features of subject property.

  • For example, if the comparable 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.
  • 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 might sell for can only be determined once all differences between the comps and the subject have been evaluated. At Central Alabama Appraisal, we are experts in knowing the value of particular items in Wetumpka and Elmore County neighborhoods. This approach to value is usually given 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 an additional method of valuing real estate. In this scenario, the amount of revenue the property produces is factored in with other rents in the area for comparable properties to determine the current value.

Coming Up With The Final Value

Analyzing the data from all approaches, the appraiser is then ready to document an estimated market value for the property at hand. Note: While the appraised value is probably the most reliable indication of what a property 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'. 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 the event they had to sell the property again. Here's what it all boils down to, an appraiser from Central Alabama Appraisal will help you attain the most fair and balanced property value, so you can make the most informed real estate decisions.