Understanding Appraisals

A home purchase is the most significant financial decision many may ever consider. It doesn't matter if a main residence, an additional vacation property or a rental fixer upper, purchasing real property is a detailed transaction that requires multiple people working in concert to make it all happen.

It's likely you are familiar with the parties having a role in the transaction. The most familiar person in the transaction is the real estate agent. Then, the mortgage company provides the financial capital needed to bankroll the deal. The title company ensures that all details of the sale are completed and that the title is clear to transfer to the buyer from the seller.

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So, what party is responsible for making sure the property is worth the purchase price? 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 Appraisal Solutions LLC will ensure, you as an interested party, are informed.

Appraisals begin with the home inspection

To determine an accurate status of the property, it's our responsibility to first perform a thorough inspection. We must actually view aspects of the property, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really exist and are in the condition a typical buyer would expect them to be. To ensure the stated size of the property is accurate and convey the layout of the house, the inspection often requires creating a sketch of the floorplan. Most importantly, the appraiser looks for any obvious amenities - or defects - that would have an impact on the value of the property.

After the inspection, we use 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

This is where the appraiser analyzes information on local building costs, the cost of labor and other elements to calculate how much it would cost to replace the property being appraised. This estimate often sets the maximum on what a property would sell for. It's also the least used predictor of value.

Paired Sales Analysis

Appraisers get to know the neighborhoods in which they work. They thoroughly understand the value of specific features to the homeowners of that area. Then, the appraiser researches recent sales in close proximity to the subject and finds properties which are 'comparable' to the real estate being appraised. 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 are more accurately in line with the features of subject.

If, for example, 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.
If the subject has an extra half-bathroom and the comparable does not, the appraiser might add a certain amount to the comparable property.

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. When it comes to associating a value with features of homes in Wichita and Sedgwick, Appraisal Solutions LLC can't be beat. The sales comparison approach to value is usually awarded the most consideration when an appraisal is for a home exchange.

Valuation Using the Income Approach

A third method of valuing approach to value is sometimes used when an area has a reasonable number of rental properties. In this case, the amount of revenue the property generates is factored in with other rents in the area for comparable properties to derive the current value.

Putting It All Together

Examining the data from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the property in question. It is important to note that while this amount is probably the best indication of what a property is worth, it may not be the price at which the property closes. There are always mitigating factors such as seller motivation, urgency or 'bidding wars' that may adjust an offer or listing price up or down. Regardless, 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. The bottom line is, an appraiser from Appraisal Solutions LLC will guarantee you discover the most accurate property value, so you can make profitable real estate decisions.