Making Sense of the Appraisal Process

Buying a house is the largest transaction many people may ever consider. It doesn't matter if a primary residence, a second vacation property or an investment, purchasing real property is a detailed transaction that requires multiple people working in concert to make it all happen.

Most people are familiar with the parties taking part in the transaction. The most familiar person in the transaction is the real estate agent. Next, the mortgage company provides the money necessary to finance the exchange. The title company ensures that all aspects of the exchange are completed and that the title is clear to transfer to the buyer from the seller.

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 value of the real estate is consistent with the amount being paid? This is where you meet the appraiser. We provide an unbiased opinion of what a buyer could expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Berko Appraisal Service, LLC will ensure, you as an interested party, are informed.

The inspection is where an appraisal begins

Our first responsibility at Berko Appraisal Service, LLC is to inspect the property to determine its true status. We must physically see features, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they truly are present and are in the shape a typical person would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is correct and illustrating the layout of the property. Most importantly, we look for any obvious amenities - or defects - that would affect the value of the house.

Back at the office, we use two or three approaches to determining the value of real property: a sales comparison, a replacement cost calculation, and an income approach when rental properties are prevalent.

Replacement Cost

This is where we pull information on local construction costs, the cost of labor and other elements to ascertain 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. It's 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 certain features to the residents of that area. Then, the appraiser looks up 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 fireplaces, room layout, appliance upgrades, additional bathrooms or bedrooms, or quality of construction, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject property.

  • For example, if the comparable has an irrigation system and the subject doesn't, the appraiser may deduct the value of an irrigation system from the sales price of the comparable home.
  • However, if the subject property has an extra half-bathroom and the comparable does not, the appraiser might add a certain amount to the comparable property.

In the end, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At Berko Appraisal Service, LLC , we are experts in knowing the worth of particular items in Weddington and Union County neighborhoods. The sales comparison approach to value is most often awarded 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 employed when an area has a measurable number of rental properties. In this situation, the amount of revenue the real estate generates is factored in with other rents in the area for comparable properties to give an indicator of the current value.

Arriving at a Value Conclusion

Examining the data from all applicable approaches, the appraiser is then ready to put down an estimated market value for the property in question. It is important to note that while the appraised value is probably the best indication of what a house is worth, it may not be the price at which the property closes. Depending on the specific 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.Regardless, 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. The bottom line is, an appraiser from Berko Appraisal Service, LLC will help you get the most accurate property value, so you can make profitable real estate decisions.