A home purchase is the biggest transaction some of us will ever encounter. It doesn't matter if where you raise your family, a second vacation property or one of many rentals, the purchase of real property is a detailed transaction that requires multiple parties to see it through.
Most of the parties involved are quite familiar. The most recognizable entity in the transaction is the real estate agent. Then, the lender provides the money required to finance the transaction. And ensuring all details of the transaction are completed and that the title is clear to pass to the buyer from the seller is the title company.
So, who makes sure the property is worth the amount being paid? In comes the appraiser. We provide an unbiased opinion 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 will ensure, you as an interested party, are informed.
The inspection is where an appraisal begins
To ascertain the true status of the property, it's our duty to first complete a thorough inspection. We must actually see aspects of the property, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed exist and are in the shape a typical person would expect them to be. To make sure the stated square footage is accurate and illustrate the layout of the house, the inspection often requires creating a sketch of the floorplan. Most importantly, the appraiser looks for any obvious features - or defects - that would affect the value of the property.
Back at the office, we use two or three approaches to determining the value of real property: sales comparison and, in the case of a rental property, an income approach.
Here, we pull information on local construction costs, the cost of labor and other elements to calculate how much it would cost to replace the property being appraised. This value usually sets the upper limit on what a property would sell for. The cost approach is also the least used method.
Analyzing Comparable Sales
Appraisers get to know the subdivisions in which they appraise. They thoroughly understand the value of certain features to the people of that area. Then, the appraiser looks up recent transactions in close proximity to the subject and finds properties which are 'comparable' to the home in question. By assigning a dollar value to certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or extra storage space, we add or subtract from each comparable's sales price so that they more accurately portray the features of subject.
After all differences have been accounted for, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At , we are an authority when it comes to knowing the worth of particular items in and Baltimore County neighborhoods. The sales comparison approach to value is most often awarded the most weight when an appraisal is for a real estate sale.
Valuation Using the Income Approach
A third method of valuing a house is sometimes used when a neighborhood has a measurable number of renter occupied properties. In this case, the amount of income the real estate produces is taken into consideration along with income produced by similar properties to give an indicator of the current value.
Combining information from all applicable approaches, the appraiser is then ready to state an estimated market value for the subject property. The estimate of value at the bottom of the appraisal report is not always the final sales price even though it is likely the best indication of a property's valuePrices can always be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. But the appraised value is typically employed as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. At the end of the day, an appraiser from will help you get the most accurate property value, so you can make the most informed real estate decisions.