What Is an Appraisal?

Acquiring a house can be the most serious investment most people will ever make. It doesn't matter if a main residence, a second vacation home or a rental fixer upper, purchasing real property is a detailed financial transaction that requires multiple people working in concert to make it all happen.

Most of the people participating are quite familiar. The most known entity in the transaction is the real estate agent. Next, the lender provides the money necessary to fund the transaction. And ensuring all requirements of the sale are completed and that the title is clear to pass from the seller to the buyer 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's responsible for making sure the property is worth the amount being paid? In comes the appraiser. We provide an unbiased estimate of what a buyer could 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 Spencer Appraisal Services, Inc. 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 complete a thorough inspection. We must actually view features, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they truly exist and are in the condition a reasonable person would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is proper and conveying the layout of the property. Most importantly, we look for any obvious features - or defects - that would affect the value of the property.

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.

Replacement Cost

Here, the appraiser pulls information on local construction costs, the cost of labor and other factors to calculate how much it would cost to replace the property being appraised. This estimate usually sets the maximum on what a property would sell for. It's also the least used method.

Paired Sales Analysis

Appraisers become very familiar with the subdivisions in which they appraise. They thoroughly understand the value of specific features to the homeowners of that area. Then, the appraiser looks up recent transactions in the neighborhood and finds properties which are 'comparable' to the real estate being appraised. Using knowledge of the value of certain items such as square footage, additional bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we add or subtract from each comparable's sales price so that they more accurately match the features of subject property.

  • If, for example, the comparable has an extra half bath that the subject does not, the appraiser may subtract the value of that half bath from the sales price of the comparable.
  • If the subject has an extra half-bathroom and the comparable does not, the appraiser might add an amount 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 Abington and Montgomery, Spencer Appraisal Services, Inc. is your local authority. The sales comparison approach to value is commonly given the most importance when an appraisal is for a real estate purchase.

Valuation Using the Income Approach

A third method of valuing a property is sometimes used when an area has a measurable number of renter occupied properties. In this scenario, the amount of revenue the real estate generates is factored in with income produced by nearby properties to determine the current value.

Coming Up With The Final Value

Combining information from all applicable approaches, the appraiser is then ready to put down an estimated market value for the subject property. Note: While the appraised value is probably the most accurate indication of what a property is worth, it probably will not be the final sales price. Depending on the individual situations of the buyer or seller, their level of urgency or a buyer's desire for that exact property, the closing price of a home can always be driven up or down.But the appraised value is often employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. Here's what it all boils down to, an appraiser from Spencer Appraisal Services, Inc. will help you get the most accurate property value, so you can make the most informed real estate decisions.