What Goes Into an Appraisal?

Their home's purchase is the most significant financial decision many people could ever consider. It doesn't matter if a primary residence, a second vacation property or an investment, purchasing real property is an involved transaction that requires multiple people working in concert to pull it all off.

Most of the people involved are very familiar. The most recognizable person in the exchange is the real estate agent. Then, the lender provides the money required to finance the transaction. And ensuring all areas of the exchange are completed and that a clear title passes from the seller to the purchaser is the title company.

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 in line with 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 property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Whitehouse Appraisals will ensure, you as an interested party, are informed.

Inspecting the subject property

Our first duty at Whitehouse Appraisals 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, living areas, etc, to ensure they really 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 document the layout of the property, 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.

Following the inspection, 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.

Cost Approach

Here, the appraiser analyzes information on local construction costs, labor rates and other factors to figure out 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. The cost approach is also the least used method.

Paired Sales Analysis

Appraisers get to know the neighborhoods in which they work. They thoroughly understand the value of specific features to the people of that area. Then, the appraiser looks up 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 upgraded appliances, extra bathrooms, additional living area, quality of construction, lot size, we adjust the comparable properties so that they more accurately portray the features of subject.

For example, if the comparable property has a storm shelter and the subject doesn't, the appraiser may subtract the value of a storm shelter from the sales price of the comparable.
However, if the subject has an extra half-bathroom and the comparable does not, the appraiser might add a certain amount 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 valuing features of homes in Mukwonago and Waukesha, Whitehouse Appraisals is second to none. This approach to value is most often given the most importance when an appraisal is for a home purchase.

Valuation Using the Income Approach

A third method of valuing a property is sometimes applied when a neighborhood has a measurable number of renter occupied properties. In this scenario, the amount of revenue the real estate yields is factored in with income produced by nearby properties to derive the current value.

The Bottom Line

Analyzing the data from all approaches, the appraiser is then ready to state an estimated market value for the subject property. The estimate of value on the appraisal report is not always what's being paid for the property even though it is likely the best indication of a property's valueDepending on the individual 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.But the appraised value is often employed as a guideline for lenders who don't want to loan a buyer more money than they could get back in case they had to put the property on the market again. Here's what it all boils down to, an appraiser from Whitehouse Appraisals will guarantee you attain the most fair and balanced property value, so you can make profitable real estate decisions.