An Overview of the Appraisal Process

Their home's purchase can be the most important financial decision many of us may ever consider. It doesn't matter if a primary residence, a second vacation home or one of many rentals, the purchase of real property is a detailed financial transaction that requires multiple people working in concert to pull it all off.

It's likely you are familiar with the parties having a role in the transaction. The most familiar entity in the transaction is the real estate agent. Then, the lender provides the financial capital required to finance the exchange. And the title company makes sure that all requirements of the exchange are completed and that a clear title transfers from the seller to the purchaser.

To learn more about appraising, click here to see a short video or call us today to talk about your specific property.

So, what party is 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 SJF Appraisal LLC will ensure, you as an interested party, are informed.

Appraisals start with the property inspection

To ascertain the true status of the property, it's our duty to first perform a thorough inspection. We must actually see features, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really are present and are in the shape a typical buyer would expect them to be. To make sure the stated square footage is accurate and describe the layout of the property, the inspection often requires creating a sketch of the floorplan. Most importantly, we identify any obvious features - 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 paired sales analysis, a replacement cost calculation, and an income approach when rental properties are prevalent.

Cost Approach

Here, we analyze information on local construction costs, the cost of labor and other factors to ascertain how much it would cost to replace the property being appraised. This figure often sets the upper limit on what a property would sell for. The cost approach is also the least used method.

Analyzing Comparable Sales

Appraisers become very familiar with the neighborhoods in which they appraise. They thoroughly understand the value of specific 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 in question. By assigning a dollar value to certain items such as square footage, additional bathrooms, hardwood floors, fireplaces or view lots (just to name a few), we adjust the comparable properties so that they are more accurately in line with the features of subject.

For example, if 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 home.
But, 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.

An opinion of what the subject might sell for can only be determined once all differences between the comps and the subject have been evaluated. At SJF Appraisal LLC, we are an authority when it comes to knowing the value of real estate features in Kingsley and Grand Traverse County neighborhoods. The sales comparison approach to value is most often awarded the most consideration when an appraisal is for a home exchange.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - the appraiser may use an additional approach to value. In this scenario, the amount of income the real estate produces is taken into consideration along with income produced by 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 at hand. The estimate of value on the appraisal report is not necessarily what's being paid for the property even though it is likely the best indication of a property's valueDepending on the individual circumstances 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 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 SJF Appraisal LLC will guarantee you discover the most fair and balanced property value, so you can make profitable real estate decisions.