Decoding the Appraisal Process

Their home's purchase is the most important investment most people will ever consider. It doesn't matter if a main residence, an additional vacation home or one of many rentals, purchasing real property is an involved financial transaction that requires multiple people working in concert to see it through.

The majority of the participants are quite familiar. The real estate agent is the most known entity in the transaction. Then, the mortgage company provides the money required to finance the exchange. The title company makes sure that all aspects of the exchange are completed and that a clear title passes from the seller to the purchaser.

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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 might 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 Sally Tornquist will ensure, you as an interested party, are informed.

The inspection is where an appraisal begins

Our first task at Sally Tornquist is to inspect the property to ascertain its true status. We must actually view aspects of the property, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they indeed are present and are in the condition a typical buyer would expect them to be. To make sure the stated size of the property is accurate and describe the layout of the house, the inspection often includes creating a sketch of the floorplan. Most importantly, we identify any obvious features - or defects - that would affect the value of the property.

Following the inspection, an appraiser uses 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.

Cost Approach

This is where we gather information on local building costs, labor rates and other factors to figure out how much it would cost to construct a property similar to the one being appraised. This estimate often 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 are intimately familiar with the subdivisions in which they appraise. They thoroughly understand the value of particular features to the residents of that area. Then, the appraiser researches recent sales in the vicinity and finds properties which are 'comparable' to the property being appraised. By assigning a dollar value to certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or additional storage space, we adjust the comparable properties so that they more accurately portray 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.
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.

Once all necessary adjustments have been made, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. When it comes to associating a value with features of homes in Greenville Junction and Piscataquis, Sally Tornquist is second to none. The sales comparison approach to value is most often awarded the most weight when an appraisal is for a home sale.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - we may use a third way of valuing real estate. In this case, the amount of revenue the property generates is factored in with other rents in the area for comparable properties to determine 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. Note: While the appraised value is probably the most reliable indication of what a house is worth, it may not be the price at which the property closes. There are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust the final price up or down. Regardless, the appraised value is often used 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 Sally Tornquist will guarantee you get the most fair and balanced property value, so you can make wise real estate decisions.